What is RBI’s Mission SAKSHAM?

• Reserve Bank of India (RBI) Governor Sanjay Malhotra launched Mission SAKSHAM for capacity-building of the Urban Cooperative Banking (UCB) sector.

• The RBI has been taking various regulatory and supervisory measures to support the UCB sector.

• Under Mission SAKSHAM (Sahkari Bank Kshamta Nirman), a large number of training programmes would be conducted for UCBs, covering about 1.40 lakh participants, for various target groups, including board members, senior management, heads of risk, compliance and audit functions, and employees working in IT functions and other critical areas.

• The RBI shall endeavour to conduct these training programmes with content delivery in regional languages to the extent feasible.

• The Mission has been designed in consultation with the umbrella organisation of UCBs and the national/state cooperative federations.

• The Mission is expected to enhance managerial and operational capabilities, improve the compliance culture, and strengthen institutional resilience across UCBs.

• Mission SAKSHAM aims to establish a sustainable, self-reinforcing ecosystem for continuous learning, contributing significantly to systemic stability and healthy growth and development of the UCB sector. 

Urban Cooperative Banks (UCBs)

• Cooperatives are people-centred enterprises owned, controlled, and run by and for their members to realise their common economic, social, and cultural needs and aspirations. 

• UCBs refers to primary cooperative banks located in urban and semi-urban areas. 

• The UCBs play an important role in furthering financial inclusion by generally providing traditional, if not the more modern, banking services to persons in the less included segments of the economic strata.

• Until 1966, these banks were allowed to lend money only for non-agricultural purposes. 

• These banks were traditionally centred around communities, localities and workplace groups. They essentially lent to small borrowers and businesses. Today, their scope of operations has widened considerably.

• There are over 1,400 UCBs functioning in India.

• UCBs cater to the financial needs of customers in urban and semi-urban areas.

• UCBs are primarily registered as cooperative societies under the provisions of either the State Cooperative Societies Act of the state concerned or the Multi State Cooperative Societies Act, 2002 if the area of operation of the bank extends beyond the boundaries of one state. 

• The sector is heterogeneous in character with uneven geographic spread of the banks. While many of them are unit banks without any branch network, some of them are large in size and operate in more than one state.

• Though the Banking Regulation Act came into force in 1949, the banking laws were made applicable to cooperative societies only in 1966 through an amendment to the Banking Regulation Act, 1949. 

• Since then there is duality of control over these banks with banking related functions being regulated by the Reserve Bank and management related functions regulated by respective state governments/central government.

• In March 2024, an umbrella organisation named National Urban Co-operative Finance and Development Corporation (NUCFDC) for UCBs was established with the objective to accelerate the digitization of cooperative banks by leveraging collective strengths, fostering collaboration, promoting innovation, and ensuring that member banks are well-prepared to navigate the complexities of the digital era effectively.

Dual Control of Co-operative Banks

• Under the Indian Constitution, cooperation is a State Subject covered under the Seventh Schedule. 

• During the mid-1960s, as demands for extension of the deposit insurance scheme to co-operative banks became more vocal and pressing, banking laws were made applicable to these banks so that the Reserve Bank may be able to exercise some control over them. 

• This led to the dual control of the sector in which the Registrar of Co-operative Societies (RCS) or the Central Registrar of Co-operative Societies (CRCS) were empowered to look after their incorporation, registration, management, recovery, audit, supersession of board of directors and liquidation. 

• The RBI was vested with regulatory oversight on banking activities of UCBs, State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs). 

• The RBI was also entrusted with the supervision of UCBs.

• The RBI’s regulatory and supervisory powers were, however, limited in many ways, which affected its ability to take prompt corrective actions in case of irregularities. 

• The amendment to the BR Act in 2020 seeks to protect the interests of depositors and strengthen cooperative banks by improving governance and oversight by the Reserve Bank, while enabling better access to capital.