RBI has accorded regulatory approval to National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB) for formation of Umbrella Organization for the UCB sector.
Idea of Umbrella Entity:
Co-operative Banks in some advanced countries are networked closely and thrive under an apex institution known as Umbrella Organization. Such an umbrella organization provides Cooperative Banks a wide range of banking and other related financial services. The idea for establishing Umbrella Organization for UCBs was first mooted by N S Viswanathan Committee of RBI in 2006.
Need for Umbrella Organization for UCBs
- Make the UCB sector financially resilient by helping UCBs raise capital, be a provider of liquidity to address mismatches in emergencies and crisis.
- Enhance depositor's confidence
- Extend liquidity and capital support to member UCBs
- Establish IT infrastructure for shared use of members enabling smaller UCBs to widen their range of services at relatively low cost.
- Offer fund management and other consultancy services.
- Umbrella Organization can in the long run develop into a Self-Regulatory Organization for its members.
Structure of Proposed Umbrella Organization
- Existing UCBs can subscribe to the capital of Umbrella Organization for acquiring its membership on a voluntary basis.
- The company will largely be owned and controlled by UCBs as shareholders.
- Also raise capital from the market
- It will be in the form of non-deposit accepting NBFC.