RBI panel's recommendations on urban cooperative banks

Q.  RBI’s high powered committee on urban cooperative banks headed by deputy governor R. Gandhi has made which of the following recommendations
- Published on 17 Sep 15

a. a. Private banks with over INR 20,000 crore or more business may be expected to convert to commercial banks and will be incentivized to do so as there will be restriction on expansion in cooperative sector
b. b. Smaller UCBs could convert to small finance banks.
c. Both a and b
d. Neither a nor b

ANSWER: Both a and b
 
RBI panel has suggested that private banks with over INR 20,000 may be incentivised to convert to commercial banks though conversion need not be de jure compulsory. RBI aims to push cooperative banks into private sector as compliance with global guidelines like Basel III needs that all lenders (and this includes cooperative banks) will hold adequate capital and meet prudential norms. Cooperatives are regulated by registrar of cooperatives and RBI.

Only one bank has converted from cooperative to private namely Development Credit Cooperative Bank into DCB. Conversion from cooperative to private banks would subject them to more stringent regulation under Companies Act and Banking Regulation Act.

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