Mumbai: The RBI panel has suggested to accelerate the manufacture of umbrella organizations to allow small urban cooperative banks (UCBs) to obtain a scale by becoming a part of the network.
The panel also said that the RBI must use a mandatory merger route to complete the problematic cooperative and be neutral for voluntary merges.
The panel has also called for changes in the Law of the Banking Regulatory which empowers the RBI to declare an effect issued by UCBS as covered by the Securities Contract Regulatory Law to facilitate their registration on the Exchange.
This recommendation was made by the Expert Committee at the Primary Cooperative Bank (Urban) under the leadership of the former RBI Deputy Governor N S Vishwanathan.
RBI has formed a panel in February to overcome the problem of cooperative regulations.
The panel has suggested a four-level regulation structure for UCBS.
The regulation level will depend on the scale of deposits and capital requirements and regulatory norms will survive with size.
Tier-1 will consist of banks with deposits up to RS 100 Crore, Tier-2 with a deposit between Rs 100 Crore and RS 1,000 Crore, Tier-3 between Rs 1,000 Crore and Rs 10,000 Crore, and level-4 with more than RS 1,000 deposits Crore.
The capital adequacy ratio for these banks will be between 9% and 15%, while Tier-4 Banks with more than RS 10,000 Crore deposits will face the same norms as scheduled commercial banks.
In addition to capital, the extent to which they can offer in various categories, such as gold and home loans will depend on its size.