Shah urges urban cooperative banks to see RBI as ally, cites proactive support

Union Minister of Cooperation Amit Shah on Saturday urged urban cooperative banks (UCBs) to reconsider their perception of the Reserve Bank of India (RBI), asserting that the central bank has proactively supported the sector in recent years. Speaking at the inauguration of the National Urban Cooperative Finance and Development Corporation's (NUCFDC) new office at the BSE in Mumbai, Shah called for a shift in mindset between the regulator and UCBs.

“I know of your experience till now. RBI looks at you from a particular viewpoint, and UCBs also look at RBI from a different viewpoint. But we have to come out of it,” Shah told an audience that included executives from over 1,400 UCBs and other stakeholders.

Citing his five years as Union Cooperatives Minister, Shah said, “Whenever we have put a step forward with confidence, RBI has proactively helped us.” He listed several regulatory relaxations, including liberalised branch opening, doorstep banking, permission to issue demand drafts and life certificates, and the appointment of a dedicated nodal officer for UCB affairs. These measures come against the backdrop of UCBs holding deposits exceeding ₹6 lakh crore.

Shah, who also handles the Home portfolio, welcomed the recent raising of gold loan limits and the allowance of one-time settlements for UCBs. His remarks follow the RBI’s announcement in its bi-monthly policy review on Wednesday, where Governor Sanjay Malhotra signalled progress on 'on-tap' licensing for UCBs, ending a two-decade pause in new licences.

The minister acknowledged past concerns about governance in some UCBs, which have occasionally faced failures and prompted regulatory caution. However, he emphasised the safety of lending to small borrowers, drawing from his experience chairing a UCB in Gujarat. He described a scheme offering ₹2.5 lakh collateral-free loans, where the repayment rate including interest exceeded 99%. “The management had doubts, but the repayment rate is over 99%,” he noted, adding that the lending volume under the scheme has since doubled.

Shah also announced that NUCFDC, the umbrella body for the sector, will relocate its head office from New Delhi to Maharashtra. He pointed out that 449 UCBs are based in the state, and 70% of such entities are concentrated in Maharashtra, Gujarat, Goa, and Karnataka. With only 690 current members, he urged the body to lower membership fees to bring all 1,400 UCBs into its fold.

Highlighting the benefits of NUCFDC membership, Shah mentioned access to technical expertise, compliance support, and cybersecurity solutions. He noted that a security operations centre has been established and encouraged UCBs to join it to strengthen depositor confidence.

Drawing a parallel with the Amul cooperative model, which has achieved a turnover of ₹1.25 lakh crore, Shah said UCBs could play a vital role in India’s development by supporting sole proprietors and entrepreneurs. “If India has to become a developed nation, UCBs will play an important role,” he said, urging the sector to scale up and work collaboratively with the regulator.