I. Questionnaire on Terms of Reference to the Committee

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வெளியிடப்பட்ட தேதி டிசம்பர் 07, 1999

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I. Questionnaire on Terms of Reference to the Committee

(Paragraph 1.32)

Questionnaire on Terms of Reference to the Committee

Target Groups of Questionnaire

(1)	Individuals, Institutions, Federations & Banks (IFB)
(2)	Government Officials (GO)
(3)	Weak Banks (WB)

IFB-1
TERM OF REFERENCE NO.1
To evolve objective criteria to determine the need and potential for organizing urban Co-operative banks; review the existing entry point norms and examine the relevance of special dispensation for less/least developed areas etc.

A.	Need and Potential -
	I.	What should be the Criteria for assessing the need for an Urban Co-operative Bank in a given centre?
		i)	Whether the presence of Commercial Banks / Co-operative Banks /RRBs should be taken into account while assessing the need for an Urban Co-operative Bank at a centre? Any other criterion?
		ii)	Whether Credit Gap should be a criterion? If so, how to assess the Credit Gap in your opinion? Should it be based on the projections in District Credit Plan/ Potential Linked Plan of NABARD / any other method - Please specify
		iii)	Whether population coverage per bank office should be a criterion in determining the need for a bank?
			Yes / No
		iv)	Whether Urban Banks should be allowed in rural centres ?
			Yes / No. If Yes - Why?
		v)	Whether the existing Credit Deposit ratio of the banking sector should be a determining factor for allowing new UCBs in a given centre?
			Yes / No.
B.	Entry Point Norms
	1.	How do you perceive the existing entry point capital norm as compared with the start up capital prescribed for RRBs, Local Area Banks & NBFCs?
		a) Too Low b) Too High c) Sufficient.
		(Please see Appendix I for present entry point norms)
	2.	If it is too low or too high, what should be the ideal start up capital for Urban Co-operative Banks?
		Please indicate. Rs. lakhs.
	3.	Whether Centre-wise prescription of Entry Point Norms based on population criterion is a healthy measure?
		Yes / No - Give Reasons
	4.	Whether relaxation in Entry Point Norms for Mahila/SC/ST Banks and Banks organised in Less/Least developed areas should continue? If so, Why?
	5.	There is a feeling that relaxation in Entry Capital for aforesaid categories is genesis of weakness in Urban Co-operative Banks. Do you agree?
		Yes / No - Reasons
	6.	(i)	Whether promoters should have academic qualifications?
			Yes / No.
			If Yes, whether a) Matriculation b) Graduation c) Post Graduation
		(ii)	Whether at least two promoters should have any relevant experience of working in a banking institution at least at middle level management?
			Yes / No

C.	Viability Norms
	1.	Whether the present viability norms in absolute terms should continue?
		Yes / No
	2.	If no, what should be the criteria to determine the viability of a bank?
		Please specify.
	3.	Should viability standards be qualitative i.e., compliance with Capital to Risk Assets Ratio, tolerable level of NPAs; proven track record of profitability rather than the present viability standards?
		Yes / No

GO-1
TERM OF REFERENCE NO.1
To evolve objective criteria to determine the need and potential for organizing urban Co-operative banks; review the existing entry point norms and examine the relevance of special dispensation for less/least developed areas etc.
A.	Need and Potential -
	1.	What should be the Criteria for assessing the need for an Urban Co-operative Bank in a given centre?

		i)	Whether the presence of Commercial Banks / Co-operative Banks /RRBs should also be taken into account while assessing the need for an Urban Co-operative Bank at a centre? Would you suggest any other criterion?
		ii)	Whether Credit Gap should be a criterion? If so, how to assess the Credit Gap in your opinion? Should it be based on the projections in District Credit Plan/Potential Linked Plan of NABARD -
			Please specify
		iii)	Whether population coverage per bank office should be a criterion in determining the need for a bank?
			Yes / No
		iv)	Whether Urban Banks should be allowed in rural centres?
			Yes / No. If Yes - Why?
		v)	Whether the existing Credit Deposit ratio of the banking sector should be a determining factor for allowing new UCBs in a given centre?
			Yes / No

	2.	Is the present format of survey report comprehensive or too sketchy? a) Comprehensive b) Sketchy
	3.	Should NABARD/Lead Bank also be involved in the preparation of survey report.?
		Yes / No
B.	Entry Point Norms
	1.	How do you perceive the existing entry point capital norm as compared with the start up capital prescribed for RRBs, Local Area Banks & NBFCs? a) Too Low b) Too High c) Sufficient.
		(Please see Annexure I for present entry point norms)
	2.	If it is too low or too high, what should be the ideal start up capital for Urban Co-operative Banks?
		Please indicate. Rs. lakhs.
	3.	Whether Centre-wise prescription of Entry Point Norms based on population criterion is a healthy measure?
		Yes / No - Reasons
	4.	(a) Whether relaxation in Entry Point Norms for Mahila/SC/ ST Banks and Banks organised in Less/Least developed areas should continue? If so Why?
		(b) What should be the criterion to declare a place less developed/least developed?
	5.	There is a feeling that relaxation in Entry Capital for aforesaid categories is genesis of weakness in Urban Co-operative Banks. Do you agree?
		Yes / No - Reasons
	6.	(i)	Whether promoters should have academic qualifications?
		Yes / No.
		If Yes, whether a) Matriculation b)Graduation c)Post Graduation
		(ii)	Whether at least two promoters should have any relevant
			124 experience of working in a banking institution say at middle level management?
			Yes / No
		(iii)	How to screen the antecedents of promoters?

C.	Viability Norms
	1.	Whether the present viability norms in absolute terms should continue?
		Yes / No
	2.	If no, what should be the criteria to determine viability of a bank?
		Please specify.
	3.	Should viability standards be qualitative i.e., compliance with Capital to Risk Assets Ratio, tolerable level of NPAs; proven track record of profitability rather than the present viability standards?
		Yes / No
	4.	Whether viability standard should be made open or should they be used as supervisory tools by Regulators to assess the health of Banks?

APPENDIX - I
Entry Point Norms

				(Rs. in lakh)
Category			Centres *
i)	For general category banks		A	B	C
	Share capital		100.00	50.00	25.00
	Membership		2000	1500	1000

	Relaxed entry point norms for
			Centres *
			A	B	C
ii)	Less developed	Share capital	50.00	25.00	12.50
	States	(50% of the entry
		point share capital)
		Membership	2000	1500	1000
iii)	Least developed	Share capital	33.33	16.67	8.33
	States (N.E.	(33.33% of
	States - Tribal	the share the
	areas etc.)	entry point
		share capital)
		Membership	1334	1000	667
		(66.67 % of the
		entry point norms)

iv)	Banks organised	Share capital	50.00	25.00	12.50
	by Mahilas/SCs/	(50% of the entry
	STs	point share capital)
		Membership	2000	1500	1000
* Centre		Population
A - Metropolitan		10 lakh and above
B - Urban		1 lakh and above but less than 10 lakh
C - Semi-urban		10,000 and above but less than 1 lakh
Entry Point Norms for :		Rs.
i)	Regional Rural Banks 1 crore
ii)	Local Area Banks	5 crore
iii)	NBFCs	2 crore

IFB-2

TERM OF REFERENCE No. II

To review the existing policy pertaining to branch licensing and area of operation of urban cooperative banks

Branch Licensing:

1.	Is the present policy on branch licensing is too rigid / too liberal?
	(Please see Appendix II for present policy frame work)
2.	Whether there is a need for continuing with present requirement of obtaining licence from RBI under Section 23 of B. R, Act for opening branches or should it be dispensed with?
	(a) Continue (b) Dispense with
3.	What are your views on the concept of Annual Action Plan (AAP) presently in vogue?
4.	Should the Annual Action Plan be co-terminus with (a) Financial Year (b) Calendar Year (c) Just a period of 12 months?
	Please Specify.
5.	How do you work out the need and viability of a branch at a particular centre?
	Please indicate.
6.	Is ' No Objection' certificate from RCS for issue of a branch licence necessary?
	Yes. / No. If yes, Why?

Area of Operation:
1.	Do you think expansion of area of operation of urban cooperative banks beyond thedistrict of their registration defeats the cooperative character of these institutions?
	Yes / No - If No, please give reasons.
2.	Cooperation being a state subject, whether cooperative banks should be allowed to expand their operations beyond the jurisdiction of State of Registration?
	Yes / No - If yes, Please give reasons.
3.	Has the policy of allowing multi-state expansion of Urban Cooperative banks -
	(a) affected the cooperative character of UCBs? (b) brought the UCBs on par with commercial banks?
	Please Specify.

GO-2
TERM OF REFERENCE No. II
To review the existing policy pertaining to branch licensing and area of operation of urban cooperative
Branch Licensing:
1.	Is the present policy on branch licensing too rigid / too liberal?
	(Please see Appendix II for our present policy frame work)
2.	Whether there is a need for continuing with present requirement of obtaining licence from RBI under Section 23 of B. R, Act for opening branches or should it be dispensed with?
	(a) Continue (b) Dispense with
3.	What are your views on the concept of Annual Action Plan (AAP) presently in vogue?
4.	Should the Annual Action Plan be co-terminus with (a) Financial Year (b) Calendar Year (c) Just a period of 12 months?
	Please Specify.
5.	How do you work out the need and viability of a branch at a particular centre?
	Please indicate.
6.	Is ' No Objection' certificate from RCS for issue of a branch licence necessary?
	Yes. / No. If yes, Why?
7.	If RBI is the sole Regulatory Authority for issue of branch licences under Section 23 of the B.R. Act, does not Registrar's prior clearance tantamount to conflict in regulation?

Area of Operation:
1.	Do you think expansion of area of operation of urban cooperative 129 banks beyond the district of their registration defeats the cooperative character of these institutions?
	Yes / No - If No, please give reasons.
2.	Cooperation being a state subject, whether cooperative banks should be allowed to expand their operations beyond the jurisdiction of State of Registration?
	Yes / No - If yes, Please give reasons.
3.	Has the policy of allowing multi-state expansion of Urban Cooperative banks :
	(a) affected the cooperative character of UCBs? (b) brought the UCBs on par with commercial banks?
	Please Specify.

APPENDIX - II
BRANCH LICENSING NORMS
Urban Co-operative Banks complying with following norms are eligible to apply for new branches/upgradation of existing extension counters into full-fledged branches.
1.	The bank should be licensed under Section 22 of the Banking Regulation Act, 1949 (AACS) and not classified as weak and non-viable.
2.	It should have adopted prudential accounting norms regarding income recognition, assets classification, provisioning etc.
3.	It should have posted profits during the preceding three accounting years.
4.	It should have achieved the prescribed lending targets towards priority and weaker sections.
5.	It's level of gross Non-performing Assets should not exceed 15% of it's total loans and advances and it should make full provisioning therefore.
6.	It should scrupulously comply with regulatory framework of Reserve Bank of India i.e. maintenance of stipulated CRR and SLR as envisaged under the Banking Regulation Act,1949 (AACS) and/or Reserve Bank of India Act,1934, as the case may be, as also timely submission of statutory and other returns. It should have also furnished satisfactory compliance to the Reserve Bank of India's latest inspection findings.

IFB-3
TERM OF REFERENCE NO.III
To consider measures for determining the future set up of Weak /unlicensed banks

1.	The present viability norms and norms for classifying UCBs as weak are indicated in Appendix III.
	(a)	Do you consider these norms/methods of classifying banks as weak to be in order?
		Yes / No.
		i) If no, please indicate in brief the reasons for the same and
		ii) What criteria you would like to suggest to replace the present ones.
	(b)	Do you think that the present norms are sufficient to identify the banks at the incipient stage of weakness? If no, what according to you should be the parameters?

2.	Is the system of monitoring progress of a weak bank through Bank Level Rehabilitation Review Committee (BLRRC) effective?
	Yes / No.

		i) If no, which other forum/system you would suggest to monitor effectively the progress of weak banks?
		ii) Do you suggest any change in the composition of BLRRC? If yes, please furnish details.
3.	What concessions/support/facilities according to you may be extended by State Govt./State Co-op.bank/RBI/Federation/ Association to weak banks for their turnaround?
	Please specify.
4.	What according to you the outer limit RBI should allow to weak banks to come out of weak status before resorting to the ultimate step of merger / liquidation? a) 2 years b) 3 years c) 5 years
5.	(a)	Do you agree that a bank whose networth is likely to become negative should not be allowed to function?
	(b)	If Yes to be above, when should action be taken in respect of a bank whose neworth is likely to become negative?
6.	At present there are no specific provisions in several State Cooperative Societies Act for compulsory merger/amalgamation either by the RCS or as per the requisition of RBI. Do you think such a provision will help in weeding out weak UCBs?
	Yes / No
7.	Several urban banks are allowed to function without RBI licence till their licence is refused by RBI. These banks have failed to satisfy the various licensing parameters laid out by RBI. Since they are in existence for over 3 decades, do you think, further time should be given to them for complying the expected standards?
	(a)	If yes, how much more time may be given to them to comply with the licensing norms? i) 1 year ii) 2 years
	(b)	If no, do you think that their licences should be refused and they are taken into liquidation?
		Yes / No - If no, then what are your suggestions?

APPENDIX - III
A.	Norms for classification of weak urban banks
	An UCB is classified as "weak" if it qualifies any one of the following conditions:
	(i)		owned funds are eroded to the extent of 25% or more by the unprovided bad or doubtful debts, other bad assets and accumulated losses or overdues exceed 50% of loans and advances outstanding.
	(ii)		does not comply with the provisions regarding minimum share capital in terms of section 11(1) of the Banking Regulation Act, 1949 (AACS) i.e., real or exchangeable value of paid up share capital and reserves have fallen below the stipulated norm of rupees one lakh.
	(iii)		has not achieved viability norms prescribed by RBI from time to time.

B.	Norms of Viability as per instructions issued in 1993

					(Rs. in lakhs)
		Centres with Population of
Item		50 lakhs	10 lakhs and	1 lakh and	10000 and
		and above	above but less	above but less	above but less
			than 50 lakhs	than 10 lakhs	than1 1akh
1.	Share capital	75	40	25	10
2.	Reserves	30	16	10	4
3.	Deposits	645	344	215	86
4.	Advances	525	280	175	70
5.	Working capital	750	400	250	100
6.	Membership	6000	4000	3000	2000

WB-3

TERM OF REFERENCE NO.III:

To consider measures for determining the Future set up of weak/unlicensed banks

The following are some causes for weakness of banks. Please indicate which of the following important factor contributed to the weakness of your bank.

	(i)	Defective loan policy and procedure, (ii) lack of effective post-sanction follow up, (iii) delay in filing arbitration / execution proceedings (iv) concentration of loans to Directors/ their relatives/ preferred borrowers/particular sector/activity/security, (v) poor internal control and housekeeping, (vi) mismanagement of ex-chairman / Board of Directors, (vii) large scale fraud, (vii) high establishment cost, (viii) dissensions among board members, (ix) untrained staff, (x) any other reason? (Specify)
2.	(a)	Did you receive any assistance from Apex Bank/Co-operative Dept./Association/Federation in preparing the action plan submitted by you to RBI? If so, please state nature of assistance.
	(b)	If the action plan was prepared taking into account all relevant factors, what are the factors responsible for not achieving the targets indicated in the action plan?
	(c)	Do you feel that deregulation of interest rates have affected your business and chances to come out of weak status?
		Yes / No
3.	(i)	Whether Bank Level Rehabilitation Review Committee (BLRRC) is constituted for your bank?
		Yes / No
	(ii)	If yes, do you find this forum effective/helpful in rehabilitating your bank?
		Yes / No
	(iii) Do you feel that BLRRC should be voluntary arrangement instead of compulsory one?
		Yes / No
	(iv)	Do you feel that the progress of rehabilitation should be directly monitored by RBI periodically instead of assigning this job to outside agencies such as Federation/State Co-op. Bank etc.?
	(v)	How many BLRRC meetings took place during - (indicate number) 1996-97 1997-98 1998-99
	(vi)	Do you wish any change in the present system/forum?
		Yes / No
	(vii)	What are your suggestions for improvement in the present set up and working of BLRRC?
4.	What concessions/support/facilities do you expect for coming out of 'weak' status from -
Please give details
	(i)	State Government
	(ii)	State Co-operative Bank
	(iii)	District Central Co-operative Bank
	(iv)	Reserve Bank of India
	(v)	Federation/Association of Co-operative Banks
5.	(a)	What according to you should be the outer time limit given by RBI to banks to come out of weak category and fulfill their statutory obligations to depositors?
		Time
		i) 2 years
		ii) 3 years
		iii) 5 years
	(b)	What are the main reasons for not coming out of weak status even after being under rehabilitation for more than 5 years.
6.	Usually weak banks are given 3 to 5 years to come out of weakness. Experience shows turnaround cases are very rare. In such an eventuality, the banks have to be either merged or liquidated, resulting hardship to depositors and employees. Do you think that compulsory amalgamation/ merger should be insisted?

		GO-3
TERM OF REFERENCE NO.III
To consider measures for determining the future set up of weak/unlicensed banks
1.	As per present norms, weak banks in existence for more than 5 years should be either merged or liquidated. In this process, the RCS/Co-operative Department has to play a major role. Experience reveals general apathy from most of the Registrars in this regard. Merger proposals are very rare. (a) Do you think liquidation is a solution by itself? (b) Do you think that there should be compulsory merger/liquidation?
	Yes / No.
	If yes, please suggest suitable legislative amendment to the Cooperative Societies Act of your State.
2.	(a)	Do you feel that the forum of Bank Level Rehabilitation Review Committee (BLRRC) is effective/helpful mechanism to monitor rehabilitation process of weak banks and play useful role in bringing banks out of weak status?
	(b)	The forum of BLRRC/SLRRC set up for rehabilitation of weak banks are not functioning efficiently except in one or two states.
		What are your suggestions for improving their efficiency?
	(b)	What other mechanism you would like to suggest to replace the existing one or to strengthen the present one?
3.	Do you agree that a bank whose networth is likely to become negative should not be allowed to function?
4.	Several unlicensed banks have been allowed to function without RBI licence They have not been able to fulfill the norms prescribed by RBI despite lapse of more than 3 decades. Do you feel that they may be given final opportunity to comply with the norms within a period of 1 to 2 years failing which they should be taken into liquidation?

		IFB-GO 4
TERM OF REFERENCE NO. IV
To examine the feasibility of introducing capital adequacy norms for urban co-operative banks
1.	Should urban co-operative banks be subjected to capital adequacy prescription?
	Yes / No - If no, Why?
2.	Whether ceiling on individual share holding in respective State Co-operative Societies Act is an impediment in introduction of capital adequacy to UCBs?
	Yes / No
3.	If yes, what are the alternative avenues through which owned funds can be augmented?
	Please specify.
4.	Do you agree that until urban co-operative banks shore up their owned funds to comply with capital adequacy norms, they should deny dividend to members?
	Yes / No
5.	If capital adequacy norms are prescribed to UCBs, should they be on the lines of commercial banks?*
	Yes / No. If No, please indicate the prescription and time frame.

*	At present Commercial Banks are required to maintain a minimum Capital to Risk Asset Ratio (CRAR) of 8%. The Ratio will be 9% with effect from the year ending 31st March 2000.

		IFB-5
TERM OF REFERENCE NO.V
To examine the need for conversion of Co-operative Credit Societies into Primary Co-operative Banks
	1.	Should the present policy of conversion of co-operative credit ^societies* into Urban Co-op. Banks continue?
		Yes / No. Reasons
	2.	By allowing conversion of co-op. credit societies into UCBs the co-op. character gets diluted. Do you agree?
		Yes / No. Reasons
	3.	Whether conversion of credit societies leads to mushrooming of urban co-op. banks?
		Yes / No
	4.	If the objective of co-op. credit society is to serve its members in a very compact area of operation, why should it be converted into a bank with additional responsibilities?
		Please give reasons.
	5.	Should there be a ceiling on the deposits to be raised by a cooperative credit society?
		Yes / No. If Yes please indicate the amount of ceiling, Rs. .

*	Co-operative Credit Societies as defined in Section 5 cc(ii) of B.R.Act, 1949 (As Applicable to Co-op. Societies).

GO-5
TERM OF REFERENCE NO.V
To examine the need for conversion of Co-operative Credit Societies into Primary Co-operative Banks
1.	Should the present policy of conversion of co-operative credit societies* into Urban Co-op. Banks continue?
	Yes - Reasons / No - Reasons
2.	By allowing conversion of co-op. credit societies into UCBs the co-op. character gets diluted. Do you agree?
	Yes / No. Reasons
3.	Whether conversion of credit societies leads to mushrooming of urban co-op. banks?
	Yes / No
4.	If the objective of co-op. credit society is to serve its members in a very compact area of operation, why should it be converted into a bank with additional responsibilities?
	Please give reasons.
5.	If conversion of Co-op Credit Societies is not allowed then how to ensure their effective regulation?
	Please Comment.
6.	Should there be a ceiling on the deposit to be raised by a cooperative credit society?
	Yes / No. If Yes please indicate the amount of ceiling, Rs._______.

*	Co-operative Credit Societies as defined in Section 5 cc(ii) of B.R. Act, 1949 (As Applicable to Co-operative Societies).

IFB-6
TERM OF REFERENCE NO.VI
To suggest necessary legislative amendments to B.R. Act and Cooperative Societies Act of various States for strengthening the urban banking movement
1.	What in your opinion is the most vexatious problem for UCBs on account of statutory provisions in Co-operative Societies Act/B.R. Act, 1949 (As Applicable to Co-operative Societies Act)?
	Please specify
2.	Whether dual control on urban co-operative banks is desirable?
	Give Reasons.
3.	If dual control is coming in the way of smooth functioning of UCBs, how to resolve the conflict in regulation?
4.	Whether by transferring the subject of co-operation to Concurrent List of the Constitution, the irritants in dual control can be reduced?
	Yes / No . If yes, what should be the road map?
5.	Whether RBI should be vested with direct powers of supersession of boards, liquidation/amalgamation/merger of unviable and weak banks?
	Yes / No
6.	Should not State Co-operative Societies Acts be amended to give greater autonomy to UCBs in the realm of their day to day operational areas, viz., investment of funds, recruitment of personnel, audit, acquisition of moveable/immovable properties?
	Yes / No
7.	Should there be a separate chapter in every State Co-operative Societies Act dealing with UCBs?
	Yes / No
8.	What in your opinion are the highly restrictive provisions in Cooperative Societies Act of your State?
	Please specify.
9.	Whether in your opinion it would be appropriate to have an Act on the lines of the Andhra Pradesh Mutually Aided Co-operative Societies Act (APMACS) for your State.
	Yes / No. Reasons.
10.	What changes you would suggest in B.R.Act/Income Tax Act/ Your State Co-op. Societies Act to strengthen Urban Banking Movement?

GO-6
TERM OF REFERENCE NO.VI
To suggest necessary legislative amendments to B.R. Act and Co-operative Societies Acts of various States for strengthening the urban banking movement
1.	What in your opinion is the most vexatious problem for UCBs on account of statutory provisions in Co-operative Societies Act/B.R. Act, 1949 (As Applicable Co-operative Societies)?
	Please specify
2.	Whether dual control on urban co-operative banks is desirable?
	Please give reasons.
3.	If dual control is coming in the way of smooth functioning of UCBs, how to resolve the conflict in regulation?
4.	Whether by transferring the subject of co-operation to Concurrent List of the Constitution, the irritants in dual control can be reduced?
	Yes / No . If yes, what should be the road map?
5.	Whether RBI should be vested with direct powers of supersession of boards, liquidation/amalgamation/merger of unviable and weak banks?
	Yes / No
6.	Should not State Co-operative Societies Acts be amended to give greater autonomy to UCBs in the realm of their day to day operational areas, viz., investment of funds, recruitment of personnel, audit, acquisition of moveable/immovable properties?
	Yes / No
7.	Should there be a separate chapter in every State Co-operative Societies Act dealing with UCBs?
	Yes / No
8.	If co-op. banks are owned by the people, why State Governments should have a say in their functioning?
	Please Comment.
9.	Whether in your opinion it would be appropriate to have an Act on the lines of the Andhra Pradesh Mutually Aided Co-operative Societies Act (APMACS) for your State.
	Yes / No. Reasons.
10.	What changes you would suggest in B.R.Act / Income Tax Act your State Co-operative Societies Act to strengthen Urban Banking Movement?.