Urban cooperative banks (UCBs) in Maharashtra are up in arms against the centres decision to levy income tax from 2006-07. A delegation headed by Kailashchandra Agarwal, president, Maharashtra Urban Cooperative Banks Federation and Rajya Sabha MP Eknath Thakur will approach the union finance minister to exempt UCBs from income tax. We have spoken to the union agriculture minister Sharad Pawar and he has assured us a direct meeting with prime minister Manmohan Singh and union finance minister P Chidambaram soon, Thakur said.

Thakur said UCBs have paid around Rs 44 crore in taxes to the government this year and paying taxes would make it difficult for the banks to build reserves.

He said memories of Madhavpura continued to linger on the cooperative sector since 2001 leading to a loss of confidence among depositors. The centres decision to allow the entry of foreign banks from 2009 would make life even more difficult for UCBs, he said.RBI is suffocating the entire UCB sector and the regulatory overkill has led to the withdrawal of licences of 93 UCBs since then, he said. The real malady for the UCBs is the philosophy adopted by RBI that would rather have a small number of large banks than a large number of small banks. The US alone has over 8,300 community banks, he added.