Co-op banks can become small finance banks, says RBI
- The Reserve Bank of India in its recent monetary policy statements announced to allow urban co-operative banks (UCB) to convert into small finance banks (SFB).
- The Reserve Bank of India has decided to allow voluntary transition of urban co-operative banks (UCB) into small finance banks (SFB).
- UCBs had been facing financial trouble couple of years ago which led RBI to stop issuing fresh licenses to UCBs.
- The monetary policy has noted that the performance of UCBs has improved recently while their numbers have come down due to mergers and closures.
- UCBs currently face regulation by both the RBI and the respective State governments.
- The conversion of UCBs into SFBs will allow them to be regulated only by the RBI.
- The Reserve Bank of India has also allowed all banks to spread their mark-to-market losses for the April-June quarter
- The Reserve Bank of India has decided to grant banks the option to spread the mark-to-market (MTM) losses on investments held in ‘Available for Sale’ and ‘Held for trading’ portfolio for the quarter ending June 30, 2018,
- Rising bond yields have resulted in mark-to-market losses for banks because Bond yields and prices are inversely related.
10. Co-operative are the bank that holds deposits, makes loans and provides other financial services to cooperatives and member-owned organizations.