RBI directs large cooperative banks to report exposures above Rs. 5 crore

Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Prelims and Mains focus: about CRILC, Cooperative banks and how they are different from commercial banks

News: The Reserve Bank on Friday directed large cooperative banks to report all exposures of Rs 5 crore and more to the Central Repository of Information on Large Credits (CRILC), a move aimed at early recognition of financial distress.

Background

• Earlier in its bi-monthly monetary policy review this month, the RBI had announced to bring UCBs with assets of Rs 500 crore and above under the CRILC reporting framework.

• “It has been decided that Primary (Urban) Co-operative Banks (UCBs) having total assets of Rs 500 crore and above...on all borrowers having aggregate exposures of Rs 5 crore and above with them to CRILC maintained by the Reserve Bank," it said in a notification.

What is CRILC?

• The Reserve Bank has created a CRILC of commercial banks, all India financial institutions and certain non-banking financial companies with multiple objectives, which, among others, include strengthening offsite supervision and early recognition of financial distress.
• It was set up to collect, store, and disseminate credit data to lenders.
• CRILC is a borrower-level supervisory dataset that keeps the record of loans of Rs 5 crore and above.
• In India, there are four privately owned credit information companies (CICs). They are CIBIL, Equifax, Experian, and High Mark Credit Information Services.
• The RBI has also mandated all its regulated entities to submit credit information individually to all four CIC.
• “It has been decided that Primary (Urban) Co-operative Banks (UCBs) having total assets of Rs 500 crore and above...on all borrowers having aggregate exposures of Rs 5 crore and above with them to CRILC maintained by the Reserve Bank," it said in a notification.
• Aggregate exposure will include all fund-based and non-fund-based exposure (like partial credit enhancement) including investment exposure on the borrower.
• To start with, UCBs will be required to submit CRILC report on quarterly basis with effect from December 31, 2019.

About Cooperative Banks

• Initially set up to supplant indigenous sources of rural credit, particularly money lenders, today they mostly serve the needs of agriculture and allied activities, rural-based industries and to a lesser extent, trade and industry in urban centres. Anyone Co-operative Bank Limited (ACBL) is the first co-operative bank in India located in the city of Vadodara in Gujarat.
• Registered under the Cooperative Societies Act, 1912 → Under the state government
• Managerial aspects of these banks, — registration, management, administration, recruitment, amalgamation, liquidation, etc are controlled by the state governments
• Regulated by the Reserve Bank of India under the Banking Regulation Act, 1949 and Banking Laws (Application to Co-operative Societies) Act, 1965
• Matters related to banking are governed by RBI directives
• Cooperative banks are owned by their customers and follow the cooperative principle of one person, one vote
• Work on the principle of “No Profit, No Loss”
• Priority Sector Lending (PSL) does not applies to cooperative banks
• Reserve ratios viz. SLR & CRR applies to them