Kerala - Thiruvananthapuram   

RBI help to tone up urban banks

THIRUVANANTHAPURAM: The State government will sign a Memorandum of Understanding (MoU) with the Reserve Bank of India (RBI) on Thursday to bring about greater accountability and transparency in the business practices of the 60 urban cooperative banks in the State and to eventually facilitate their expansion and modernisation.

The MoU would pave the way for the 325-branch strong urban banks, which have a combined deposit base of Rs. 3,000 crore, to explore new avenues of growth with the establishment of scores of new branches and provision of modern banking facilities to their customers. The urban banks would be able to go in for common software, start extension counters and introduce core banking besides providing ATM and credit card facilities.

The MoU had its genesis in a dialogue between the RBI and the State government on the need to bring about greater accountability in the functioning of urban cooperative banks which gained urgency with the detection of financial irregularities running into roughly Rs.2,000 crore over the last several years. The RBI had proposed audit by chartered accountants to be nominated by it to ensure greater transparency and accountability in their business dealings, but this proposal ran aground during the United Democratic Front (UDF) rule on account of resistance from different quarters, one of the worries being that such external audit would hurt the already existing audit wing at the State level.

Things began moving only after Cooperation Minister G. Sudhakaran took up the lead from where it was left off by the last government and wrote to the RBI Governor suggesting that there could be simultaneous audit by both the chartered accountants to be deputed by the RBI and the audit wing at the State level. Things started moving with his proposal finding acceptance with the RBI. The Cooperation Department has decided to create the post of an Auditor General to head a revamped audit wing at the State level.

“We will now have a strong audit mechanism of our own even as the chartered accountants nominated go about their work. This would be in the larger interests of the banks and their customers and would also facilitate greater growth of the urban cooperative banks in the days to come,” Mr. Sudhakaran told The Hindu here on Monday.

Once the MoU comes into effect, the functioning of the urban cooperative banks would be guided by a Task Force for Cooperative Urban Banks.

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