Bangalore, Feb.03, 2010

BANGALORE: The non-performing assets (NPAs) of the urban cooperative banks (UCBs) in Karnataka were far higher than the national average, said Deputy Governor of Reserve Bank of India (RBI) K C Chakrabarty.

While the national average of NPAs among the UCBs stood at 8.2 per cent, it was 13.38 per cent among the banks in Karnataka, and banks had to reduce their NPAs, said Dr. Chakrabarty here on Tuesday.

He was responding to a request on issuing banking licence to the urban cooperatives during the launch of centralised core banking solutions for the UCBs in Karnataka.

"Of the 1,700 urban cooperative banks in India, over 60 per cent are not functional.

"If all the banks functioned efficiently, there is no need for new banks. We will allow opening of new banks provided non-functional banks are allowed to be closed," said the Deputy Governor who addressed each of the concerns.

Karnataka State Cooperative Urban Banks Federation president H K Patil had earlier raised several issues affecting the growth of urban cooperative banks in the country.

He sought new licences to the urban cooperative banks to expand operations and relaxation in the statutory liquidity ratio (SLR) requirements and NPA norms.

On another request seeking funds from the RBI for technology upgrade, he said: "The RBI is a regulator and does not fund projects. Such requests should be made to the Union Government. However, my suggestion is not to ask for government funding as it would lead to interference in day-to-day work.

The basic principle of the RBI in regulating all public deposit taking entities is to ensure that these institutions survive and public deposit is safe," the Deputy Governor said in response to a request to relax the statutory liquidity ratio norms for the urban cooperatives.

At crossroads

Dr. Chakrabarty said the UCBs in the country were at crossroads and future for these banks was in penetrating the urban masses to enable the non-banking section of the population. "There is a big population that has not been covered by the commercial banks, and the cooperatives can lend banking services to this section," he said and added that deployment of technology would lead to the new 'avatar' of the urban cooperative banks. The financial inclusion in society could be brought about only by the cooperatives and not the commercial banks, he added.