Permitting Urban Cooperative Banks (UCBs) to Offer Door-step banking: Remembering Syndicate Bank and Dr TMA Pai

In its Monetary Policy yesterday, RBI permitted urban cooperative banks to offer doorstep banking:

In order to attain harmonization of regulatory framework across REs and to provide convenience of banking services to the customers at their door-step, it has been decided to permit UCBs to extend doorstep banking services to their customers on par with scheduled commercial banks. A detailed circular will be issued separately.

RE implies Regulated Entities.

RBI followed this announcement with changes in Banking Regulation Act:

In terms of Section 23 of the Banking Regulation Act, 1949 (AACS) Primary (Urban) Co-operative Banks (UCBs) are required to seek prior approval of the Reserve Bank for opening any new place of business including offering services at the doorstep of the customer.

2. Keeping in view the above, it has been decided to allow financially sound and well managed (FSWM) UCBs to provide Doorstep Banking Services to their customers on a voluntary basis. However, Non-FSWM UCBs would have to seek prior approval of concerned Regional Office of Department of Supervision of the Reserve Bank to provide Doorstep Banking Services.

3. Eligible UCBs may formulate a scheme for providing Doorstep Banking Services to their customers, with the approval of their Boards, in accordance with the guidelines enclosed to this letter.

4. UCBs are further advised to take into account the various risks that may arise on account of offering Doorstep Banking Services to customers either directly through own employees or through agents and take all necessary steps to manage the same.

5. The operation of the scheme may also be reviewed by the Boards of UCBs on a half-yearly basis during the first year of its operation. The scheme may be reviewed thereafter on an annual basis.

Obviously each time I see announcements on doorstep banking, memories jog to Syndicate Bank and its founder Dr. TMA Pai. Dr Pai had pioneered door to door banking in India way back in 1920s for mobilizing its innovative pigmy deposits across rural South Canara region.

The RBI was established a decade later in 1935. The regulator did not understand the bank’s practices. It asked the Bank to stop door to door banking as the employees could not be appointed as agents to collect deposits! RBI also disagreed with Dr Pai on many other new ideas that the bank had implemented. Ironically many of these ideas became policies later.

 

 

One Response to “Permitting Urban Cooperative Banks (UCBs) to Offer Door-step banking: Remembering Syndicate Bank and Dr TMA Pai”

  1. Permitting Urban Cooperative Banks (UCBs) to Offer Door-step banking: Remembering Syndicate Bank and Dr TMA Pai - Daily News DOT Says:

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