Mumbai: The Reserve Bank has asked urban cooperative banks, which have been facing a steady decline in their market share for over a decade now, to improve their management and governance practices so that customers repose their trust in them and the banks can remain relevant.
Since the fall of the Madhavpura Cooperative Bank scam of 2002, urban cooperative banks (UCBs) have been witnessing a steady fall in their market share, which declined from 6.4 per cent in FY02 to 3.3 per cent in FY17, according to Reserve Bank, Deputy Governor, NS Vishwanathan.
As of March 2017, there were 1,562 UCBs with deposits of Rs 4,43,468 crore and advances of Rs 2,61,225 crore, accounting for about 3.6 per cent of deposits and 2.9 per cent of advances of the banking sector, he said.
On an aggregate basis, deposits grew 13.1 per cent and advances grew 6.6 per cent in FY17. Gross NPAs stood at little over seven per cent and 91 per cent UCBS were reasonably capitalised with a core capital of over nine per cent under the Basel I norms, he said.
“While one may be tempted to attribute the decline in market share of UCBs to the emergence of other competing alternatives within and outside the banking sector, there is no gainsaying the fact that UCBs need to regain and retain the confidence of their depositors to remain in business,” Vishwanathan told an event organized by the Gujarat Urban Cooperative Banks Federation in Gandhinagar on 4 August.
“The real barometer of public confidence is the market share of the sector, which has nearly halved between FY02 when it had stood at 6.4 per cent and FY17 when it had plunged to 3.3 per cent,” Vishwanathan was quoted as saying in a speech posted on its website yesterday.
He said as the regulator RBI has taken several measures to restore public confidence in UCBs and listed the signing of the tripartite agreements with states and formation of a task-force in most states as the most impactful of them.