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RBI/2006-07/175
UBD.CO(PCB)Cir.No.18/07.01.000/2006-07
November 13 , 2006
The Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Dear Sir/Madam,
Mid-Term Review of Annual Policy Statement for
the year 2006- 07-
Conversion of Extension Counters into full-fledged branches-
Urban Co-operative Banks
As you are aware, an announcement had been
made in the Annual Policy Statement for the year 2004-05 that the Reserve Bank
would consider issue of fresh licences for urban co-operative banks (UCBs) only
after a comprehensive policy on UCBs is put in place. This was expected to include
an appropriate legal and regulatory framework for the sector and the formulation
of a policy for improving the financial health of the urban cooperative banking
sector. Consequently, authorization for opening of branches was also put on
hold.
2. As a sequel to the announcement in
the Mid-Term Review of the Annual Policy Statement for 2004-05, a Vision Document
for UCBs was placed in the public domain in March 2005, and a Medium-Term Framework
(MTF) for UCBs was evolved based on the feedback. The Vision Document and MTF
envisaged regulatory coordination between the State Governments and the Reserve
Bank by signing of a memorandum of understanding (MoU) in each state to address
the problems of dual control, within the existing legal framework. Eight State
Governments, viz, Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Uttaranchal,
Rajasthan, Chhattisgarh and Goa, have since entered into an MoU with the Reserve
Bank. A Task Force for Urban Co-operative Banks (TAFCUB) has been set up in
each of these states for identification of and drawing up of a time bound action
plan for revival of potentially viable UCBs and for non-disruptive exit for
non-viable UCBs.
3. Consequent to the regulatory coordination
brought about by signing of MoU with some of the state governments, it was announced
in the Mid-Term Review of Annual Policy Statement for the year 2006-07 (copy
of paragraph 150 enclosed) that RBI would consider permitting financially sound
UCBs registered in states, which have signed MoU with the Reserve Bank and those
registered under the Multi-State Cooperative Societies Act, 2002 to convert
existing extension counters into full-fledged branches, subject to certain conditions.
4. Accordingly, it is advised that UCBs,
other than those in Grade III and IV, registered in states which have signed
MoU and those registered under Multi-State Cooperative Societies Act, 2002 will
be eligible to convert the extension counters on completion of three years of
their operation into full-fledged branches. The shifting/ relocation of these
branches, if considered necessary by the bank, would be permitted subject to
the following conditions:
(i) The proposal is for shifting/relocation
of the converted branch within the city/town limit.
(ii) Banking services to the existing customers
of the extension counter, including the institutional customer, are ensured.
(iii) No new extension counter will be allowed
in the institution in which the extension counter is housed presently.
5. All other instructions issued in this regard remain unchanged.
6. Requests in this regard may be forwarded
to the Urban Banks Department of the Regional Office of Reserve Bank of India
concerned.
7. Please acknowledge receipt.
Yours faithfully,
(N.S.Vishwanathan)
Chief General Manager-in-Charge
Encl: As above
(b) Conversion of Extension Counters into
Full-Fledged Branches
150. In view of the regulatory co-ordination
brought about through signing MoU with State Governments and based on the positive
experience of the TAFCUBs, it is proposed:
to allow financially sound UCBs registered
in States that have signed MoU with the Reserve Bank and those registered
under the Multi-State Co-operative Societies Act, 2002 to convert existing
extension counters into full-fledged branches subject to certain conditions.
Guidelines in this regard would be issued separately.
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