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HC asks Centre, RBI to respond to plea seeking inclusion of urban co-op banks under scheme

The petitioner stated the government scheme while including other banks, has “arbitrarily” not extended it to urban cooperative banks (UCBs) that provide loans to several MSMEs.

By: Express News Service | Mumbai |
January 22, 2021 9:05:17 pm
Sexual assault under POCSO needs skin to skin contact: Bombay HCThe Bombay High Court

THE BOMBAY High Court last week issued notices to the Reserve Bank of India (RBI) and the ministries of finance and MSMEs, directing them to file replies to a petition seeking inclusion of urban cooperative banks in the Emergency Credit Line Guarantee Scheme, 2020, announced by the government in May last year to help micro, small and medium enterprises tide over losses suffered during the coronavirus-induced lockdown.

The measures announced to help the sector included collateral-free loans, automatic loans backed by a government guarantee and an updated definition of MSMEs.

Petitioner Printplus Pvt Ltd, a Bhiwandi-based MSME that manufactures paper and its products, stated that a cause for action in the petition arose as its primary lender, the Apna Sahakari Bank, had refused to extend the benefit of the scheme on July 14 last year as it is an urban cooperative bank and not a scheduled commercial bank.

The petitioner stated the government scheme while including other banks, has “arbitrarily” not extended it to urban cooperative banks (UCBs) that provide loans to several MSMEs.

Referring to the scheme, the petition states: “Unfortunately, and arbitrarily, UCBs do not fall under the ambit of the scheme, even though there are 1,541 UCBs in the country having deposits and advances Rs 4,84,316 crore and Rs 3,03,018, respectively. UCB, thus, provide essential support to a large number of MSMEs, and the scheme ought to have considered this as a relevant factor in determining the ambit of the scheme.”

Making a case for UCBs to be included in the scheme, the petition states, “UCBs are financially sound. Out of 1,540 UCBs, 1,199 banks are…rated A and B, as per RBI, which are the rating of satisfactory running banks. The gross non-performing assets (NPAs) of the UCB sector are 7.1 per cent as against gross NPAs of 9.1 per cent of the scheduled commercial banks… UCBs there are well qualified to be included in all schemes of the government.”

After hearing the matter last Thursday, the Bombay HC has issued notices to the RBI and the central government to respond to the petition. The matter will next be heard on January 28.

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