New Delhi, December 7: After five cuts in a row, the Reserve Bank of India has finally touched the pause button as it kept the repo rate unchanged. Welcoming the move, RBI’s Central Board Director Satish Marathe hailed the monetary policy statement and asserted that it’s good news for urban cooperative banks. He strongly advocated that the growth of the culture of consortium lending by the urban cooperative banks.
Reacting to the fifth bi-monthly monetary policy statement of RBI, Marathe said that the consortium lending of the UCBs will see a growth, and fearing its absence in the UCB operations may see flight of valued customers to commercial banks. Explaining the crux and elaborating on the consortium lending concept, Marathe explained that the UCB sector also have some big accounts which may need large loans. In such a situation, when an individual UCB finds it too big to handle the case individually, may form a consortium of some of the UCBs to take the call on such loan-demands. There can be a leader or even a sub-lead in the consortium to coordinate activities.
Marathe added saying that the RBI should give a detailed policy guideline for consortium lending for urban cooperative banks as the associations are well placed to assess the risks involved in it. Consortium lending is done by commercial banks in a standardized proforma and there is a need for UCBs to follow suit.
Not only this, Marathe reacted on other issues of the Monetary Policy Statement as well and the three things he highlighted were credit repository, cybersecurity and curbing UCB’s risk appetite. He also welcomed RBI’s move of bringing UCBs with assets of Rs 500 crore and above within the Central Repository of Information on Large Credits (CRILC) reporting framework. This is beneficial and will prove to be useful for the UCB sector as the database would be able to know the financial history of their borrowers.
The second issue raised by RBI related to mooting certain regulatory guidelines relating to exposure norms for single and group or interconnected borrowers, promotion of financial inclusion and priority sector lending. UCB’s risk appetite is huge and there is a need to check this, felt Marathe. Under the current norms for UCBs, the exposure to an individual borrower should not exceed 15% of its capital funds, and the exposure to a group of borrowers should not exceed 40% of its capital funds.
After overseeing the extant cyber security measures in the UCB sector RBI has come to the conclusion that there are noticeable gaps and thus a need to plug them. RBI has decided to prescribe a comprehensive cyber security framework for UCBs and it is a welcome move, said Marathe.