The recommendation by a high-power committee of the Reserve Bank of India to provide the option of turning commercial banks into urban cooperative banks with a business volume of Rs. 20,000 crore has ruffled the feathers of the State cooperative sector, which views the move as violation of the principles of cooperation.
Addressing a press conference in Bengaluru on Monday, Minister for Rural Development and Panchayat Raj H.K. Patil, immediate past chairman of Karnataka State Co-operative Urban Banks Federation, maintained that urban cooperative banks would lose their co-operative character if turned into commercial banks.
Mr. Patil cautioned the Centre that it would have to take the blame for destroying the concept of cooperative banks if it cleared the RBI’s recommendation. He said the federation would write to Prime Minister Narendra Modi to reject the recommendations.
Interestingly, only about 25 urban cooperatives in the country presently qualify to become commercial banks considering the business volume and none from Karnataka are in this group.
But Mr. Patil said it was possible to turn several urban cooperative banks in Karnataka into high-volume ones within two years. He alleged that vested interests were behind the proposal.
The Minister also opposed the committee’s recommendation to convert urban cooperatives with business volume less than Rs. 20,000 crore into micro-finance institutions.
Karnataka has 266 urban co-operative banks.
