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Govt may stop urban co-ops from putting ‘bank’ in name

November 09, 2019 05:11 AM

COURTESY TIMES OF INDIA NOV 9Govt may stop urban co-ops from putting ‘bank’ in name
Works With RBI To Revamp Law In Wake Of PMC Scam
TIMES NEWS NETWORK

New Delhi:

The government may stop urban co-operative banks (UCBs), registered under the Multi-state Co-operative Societies Act, from calling themselves banks as part of a revamp exercise for these entities that have failed to convert themselves into small finance banks and come under the Reserve Bank of India’s regulatory regime.


The move is also aimed at distinguishing banks regulated by the RBI from UCBs and sending a message to individuals. An official said the US calls member-owned financial co-operative as credit unions and a similar plan is being considered.

In September 2018, the RBI had allowed eligible UCBs to voluntarily convert into small finance banks but there was little appetite as it would impose restrictions on lending. The government and the RBI have started work on revamping the law in the aftermath of the PMC Bank scam and finance ministry officials have suggested that UCBs be barred from using banks in their name.

On Thursday, RBI governor Shaktikanta Das said the government has to decide on the amendments and added that both the central bank and the government were in discussion on the issue.

Allaying concerns about the economic downturn in the country, an official said the economy had “bottomed out” and improvements in several sectors would start reflecting by December. “Rumours keep surfacing about which we are not bothered. We have taken several liquidity measures, which are bringing positive changes now,” the official said and cited the example of the automobile sector. “No one is talking about slump in the automobile sector, which again was a rumour. Most of the leading automobile companies have done good business. Moreover, sale of second-hand cars has suddenly increased as buyers are also waiting for latest variants of BS6 cars,” the official said.

Reiterating that slump in GDP growth had bottomed out, the official said pick-up in lending and recovery in the automobile sector was a sign of revival of India’s economic growth. India’s economic growth in April-June hit a sixyear low of 5% and there were signs that expansion may not have picked up substantially in the subsequent quarter. But with the onset of festival season in October, there are some signs of a revival.

Between October 1 and 9, about Rs 81,000 crore has been extended as loans, the official said, adding that the lending momentum has only picked up in the following weeks. Also, festival buying has revived automobile sales with demand for cars showing signs of coming back.

The official said the government has been sensitive to concerns of all sectors and has been pro-actively taking measures to address them.

 

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