RBI Asks Urban Cooperative Banks to Strengthen Governance and Asset Quality

The Reserve Bank of India (RBI) has been categorical in its message to Urban Cooperative Banks (UCBs) that the cooperative banking sector must maintain high standards of governance to remain credible. RBI Governor Sanjay Malhotra on Monday advised the banks to carefully track asset quality and follow best underwriting standards. The advice came at a high-level meeting, which was conducted in Mumbai, where the Governor addressed the chairmen, Managing Directors (MDs), and Chief Executive Officers (CEOs) of some UCBs.

RBI Governor Sanjay Malhotra made it clear in the meeting that UCBs not only have the duty of disbursing loans, but they also have the duty of ensuring the quality of such loans. He emphasized the need for careful monitoring of the quality of assets. The Governor's statement is significant amid growing risks in the banking sector. He stated that adopting strong underwriting practices is the need of the hour to avoid problems like bad loans and NPAs.

Speaking on the relevance of cooperative banks, the Governor stated that UCBs continue to play a crucial role in credit delivery. These banks are a crucial link in promoting financial inclusion, especially in underserved areas. The Governor expressed confidence that recent policy initiatives initiated by the Reserve Bank will help strengthen this sector and develop in a healthy manner.

The banking business relies heavily on trust. Governor Malhotra advised bankers to adopt a customer-centric approach. He emphasized that maintaining ethical practices and timely grievance redressal are essential to maintaining customer confidence in the sector. During this interactive session, UCB heads shared their suggestions and feedback on policy and operational matters. Representatives from the National Urban Cooperative Finance and Development Corporation Limited (NUCFDC) and the National Federation of Urban Cooperative Banks and Credit Societies Limited (NAFCUB) were also present at the meeting.

In addition to the Governor, Deputy Governors Swaminathan J and SC Murmu were also present. The last such meeting was held in March last year. This move by the RBI indicates that the regulator is serious about making cooperative banks comparable and competitive with the mainstream banking system. RBI Governor Sanjay Malhotra directed urban cooperative banks to improve governance and asset quality. Learn what was discussed in the Mumbai meeting regarding customer confidence and underwriting.