INSUBCONTINENT EXCLUSIVE:
Mumbai: The Reserve Bank of India (RBI) plans to raise governance rules to strengthen the more than 1,500 urban co-operative banks after a
scam at Punjab and Maharashtra Co-operative Bank (PMC) exposed cracks in the system earlier this year.The RBI will soon be setting new
regulations regarding maximum exposure to a single borrower to reduce risks in the system, it said in a post-policy document on Thursday
after it left its key interest rates unchanged.This comes after it was discovered that PMC used more than 21,000 fictitious accounts to hide
loans it made to a single corporate borrower
PMC's loans to Housing Development and Infrastructure Limited (HDIL), a realty company stood at Rs 6,500 crore, which accounts for 73 per
cent of its overall Rs 8,880 crore loan book.The RBI will also bring large urban co-operatives under the Central Repository of Information
on Large Credits (CRILC) framework
This will require banks with assets of Rs 500 crore and more to report loan-related information to this database, helping regulators detect
signs of debt stress and potential default.At present, only scheduled commercial banks are required to report information to CRILC which
bankers say has played a significant role by serving as an easily warning signal.The RBI is also looking into strengthening the cyber
security framework for these co-operative banks
Details regarding all these regulations are yet to be issued.The urban co-operative banks typically service small local communities in
certain districts or states
Depositors at these lenders are in a relatively higher risk zone, but tens of thousands still bank with these lenders as they typically
offer better interest rates on deposits.
