To comply with new Reserve Bank regulations

Cooperative banks are likely to get more time to comply with the new regulations of Reserve Bank of India (RBI) on banking operations as neither the Central government nor the regulatory bank has completed the preparations to switch over to the new payment regime.

The RBI had set June 30 as the deadline for cooperative banks to abide by a four per cent capital adequacy norms and insisted that cooperative banks should make agriculture lending through RuPay cards. The RuPay-enabled credit card is the Indian domestic card payment network set up by the National Payment Corporation of India. The RBI had said that core banking solutions should be introduced in the primary cooperative banks through the District Cooperative Banks and agriculture lending should be routed through RuPay cards. On insisting to ensure four per cent capital adequacy, the banks will have to maintain a capital of Rs.4 for every Rs.100 lent. This was proposed to be progressively increased to seven per cent by 2014 and nine per cent by 2015. Non-compliance would have lead a total freeze on the banking operations and agriculture lending would have been the first casualty.

Banking sector sources told The Hindu here that neither the Centre nor the RBI had issued any instruction so far on the action to be initiated against the banks which had not moved over to the proposed payment system. This was mainly on account of the delay in distributing the RuPay cards and also completing the work on core banking solutions. It may take at least a year to complete such procedures and the cooperative sector would get a breather till then.

The distribution of Kisan Credit Cards (KCCs) had also not made much headway in the State since September last. As per the statistics available on September 30 last, 6,94,406 cards were distributed through cooperative banks and 1,49,279 cards through Regional Rural Banks.

When compared to other States, Kerala has a unique cooperative movement with a strong network of 1,603 primary banks and 14 district banks that come under the apex State Cooperative Bank with deposits to the tune of Rs.82,000 crore. A lion’s share of the deposits, roughly about Rs.60,000 crore, have been mobilised by the primary banks which cater to the primary financial needs of small, medium, and marginal farmers as well as traders and others at the grass-roots level.

Kerala will thus perhaps be the only State to be hit hard by the guidelines. But it may not be able to garner the support of other States to mount pressure on the Centre for an exemption from the regulator bank, sources said.