Co-op banks can become small finance banks - RBI


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.


The Reserve Bank of India in June 2018 decided to allow urban co-operative banks (UCB) to convert into small finance banks (SFB), a move aimed at bringing these entities into mainstream banking.


UCBs had been facing financial trouble till a few years ago, prompting the RBI to stop issuing fresh licences. But their performance has improved recently while their numbers have come down due to mergers and closures. UCBs currently face regulation by both the RBI and the respective State governments. By turning into SFBs, they will be regulated only by the RBI.
The regulator has also allowed all banks to spread their mark-to-market losses for the April-June quarter, equally over four quarters.
It has been decided to grant banks the option to spread the mark-to-market (MTM) losses on investments held in ‘Available for Sale ’ and ‘Held for Trading’ portfolio for the quarter ending June 30, 2018, equally over... four quarters, commencing from the quarter ending June 30.
Rising bond yields have resulted in MTM losses for banks. Bond yields and bond prices are inversely related.
Yields have hardened in the last two quarters, impelling the RBI to allow similar relaxation earlier.

Related Terms

Mark-to-market losses: Mark-to-market losses appear when an asset is priced according to a mark-to-market (MTM) accounting method. Under MTM, an asset's value is adjusted on a daily basis to reflect its market price. In other words, an asset experiences a mark-to-market loss if its market price falls from one business day to the next. In other words, an asset experiences a mark-to-market loss if its market price falls from one business day to the next.

Available-for-sale security: Available-for-sale security (AFS) is a debt or equity security purchased with the intent of selling before it reaches maturity or holding it for a long period should it not have a maturity date. Accounting standards necessitate that companies classify any investments in debt or equity securities when they are purchased as held to maturity, held for trading or available for sale.




Monday, 11th Jun 2018, 06:24:01 AM

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