Another "Kerala Model": Kerala Bank gets RBI nod

RBI gives final nod for formation of Kerala Bank | Cooperatives: Changing with times
Kerala cooperatives have learned their lessons the hard way and finally decided to get mainstreamed complying with the regulatory requirements.
Welcome initiative by Kerala. My media response:

October 10, 2019
Kerala Bank gets RBI nod*

Since the beginning of last century when cooperative movement emerged on the Indian scene, cooperatives have been playing a proactive role in the economic development and social life of Kerala. Attempts by vested interests to capture and manage cooperative institutions and resultant efforts to circumvent regulatory and supervisory requirements did affect the growth of this ideal institutional system, off and on, since certain provisions of the Banking Regulation Act, 1949 were made applicable to cooperative societies. The problems faced by cooperative banks during demonetization (2016) and the recent failure of the Mumbai-based urban cooperative bank (PMC Bank) can be traced to such intervention by external forces.
The conditions subject to which RBI has given the ‘go ahead’ to Kerala bank relating to capital adequacy, management and institutional set-up are very liberal. The stipulation that administration and management will be guided by the present guidelines for management of urban cooperative banks may need review even before the commencement of business by Kerala Bank, in the context of the recent PMC Bank failure.
In all probability, coming into being after merger of Kerala’s own State Bank of Travancore with SBI, Kerala Bank will be the biggest cooperative bank in India and soon get categorized under “too big to fail” category. That adds to GOI’s and RBI’s responsibility to ensure that the dual control (state government having a major role in management matters and RBI’s regulatory and supervisory role) does not adversely affect the institution’s smooth functioning.
M G Warrier, Mumbai
*Published in The Hindu Business Line on October 11, 2019:
RBI nod for Kerala Bank
If the link opens please read my response on Kerala Bank.

M G Warrier



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