Safety has been one of the biggest concerns in the Indian Railways system.  While the number of accidents have gone down over the last few years, the number still remains over 100 accidents a year.  In light of the recent train accidents in Uttar Pradesh (UP), we present some details around accidents and safety in the Indian Railways.

Causes of rail accidents

The number of rail accidents has declined from 325 in 2003-04 to 106 in 2015-16.[1]  The number of rail accidents as per the cause are shown in the graph below.  In 2015-16, majority of the accidents were caused due to derailments (60%), followed by accidents at level crossings (33%).1  In the last decade, accidents caused due to both these causes have reduced by about half.  According to news reports, the recent railway accidents in UP were caused due to derailment of coaches.



Between 2003-04 and 2015-16, derailments were the second highest reason for casualties.2  The Standing Committee on Railways, when examining the safety in railways, had noted that one of the reasons for derailments is defect in the track or coaches.  Of the total track length of 1,14,907 kms in the country, 4,500 kms should be renewed annually.2  However, in 2015-16, of the 5,000 km of track length due for renewal, only 2,700 km was targeted to be renewed.2  The Committee had recommended that Indian Railways should switch completely to the Linke Hoffman Busch (LHB) coaches as they do not pile upon each other during derailments and hence cause lesser casualties.2

Un-manned level crossings

Un-manned level crossings (UMLCs) continue to be the biggest cause of casualties in rail accidents.  Currently there are 14,440 UMLCs in the railway network.  In 2014-15, about 40% of the accidents occurred at UMLCs, and in 2015-16, about 28%.2  Between 2010 and 2013, the Ministry fell short of meeting their annual targets to eliminate UMLCs.  Further, the target of eliminating 1,352 UMLCs was reduced by about 50% to 730 in 2014-15, and 820 in 2015-16.2  Implementation of audio-visual warnings at level crossings has been recommended to warn road users about approaching trains.2  These may include Approaching Train Warning Systems, and Train Actuated Warning Systems.2  The Union Budget 2017-18 proposes to eliminate all unmanned level crossings on broad gauge lines by 2020.

Casualties and compensation

In the last few years, Railways has paid an average compensation of Rs 3.03 crore every year for accidents (see figure below).[2]


Note: Compensation paid during a year relates to the cases settled and not to accidents/casualties during that year.

Consequential train accidents

Accidents in railways may or may not have a significant impact on the overall system.  Consequential train accidents are those which have serious repercussions in terms of loss of human life or injury, damage to railway property or interruption to rail traffic.  These include collisions, derailments, fire in trains, and similar accidents that have serious repercussions in terms of casualties and damage to property.  These exclude cases of trespassing at unmanned railway crossings.

As seen in the figure below, the share of failure of railways staff is the biggest cause of consequential rail accidents.  The number of rail accidents due to failure of reasons other than the railway staff (sabotage) has increased in the last few years.


Accidents due to failure of railway staff

It has been noted that more than half of the accidents are due to lapses on the part of railway staff.2  Such lapses include carelessness in working, poor maintenance, adoption of short-cuts, and non-observance of laid down safety rules and procedures.  To address these issues, conducting a regular refresher course for each category of railway staff has been recommended.2

Accidents due to loco-pilots2,[3]

Accidents also occur due to signalling errors for which loco-pilots (train-operators) are responsible.  With rail traffic increasing, loco-pilots encounter a signal every few kilometres and have to constantly be on high alert.  Further, currently no technological support is available to the loco-pilots and they have to keep a vigilant watch on the signal and control the train accordingly.2 These Loco-pilots are over-worked as they have to be on duty beyond their stipulated working hours.  This work stress and fatigue puts the life of thousands of commuters at risk and affects the safety of train operations.2  It has been recommended that loco-pilots and other related running staff should be provided with sound working conditions, better medical facilities and other amenities to improve their performance.2

Actions taken by Railways with regard to the recent train accident

According to news reports, the recent accident of Utkal Express in UP resulted in 22 casualties and over 150 injuries.[4]  It has also been reported that following this incident, the Railways Ministry initiated action against certain officials (including a senior divisional engineer), and three senior officers (including a General Manager and a Railway Board Member).

The Committee on Restructuring of Railways had noted that currently each Railway zone (headed by a General Manager) is responsible for operation, management, and development of the railway system under its jurisdiction.[5]  However, the power to make financial decisions does not rest with the zones and hence they do not possess enough autonomy to generate their own revenue, or take independent decisions.5

While the zones prepare their annual budget, the Railway Board provides the annual financial budget outlay for each of them.  As a result of such budgetary control, the GM’s powers have been reduced leaving them with little independence in planning their operations.5

The Committee recommended that the General Managers must be fully empowered to take all necessary decisions independent of the Railway Board.5  Zonal Railways should also have full power for expenditure and re-appropriations and sanctions.  This will make each Zonal Railway accountable for its transport output, profitability and safety under its jurisdiction.

Under-investment in railways leading to accidents

In 2012, a Committee headed by Mr. Anil Kakodkar had estimated that the total financial cost of implementing safety measures over the five-year period (2012-17) was likely be around Rs one lakh crore.  In the Union Budget 2017-18, the creation of a Rashtriya Rail Sanraksha Kosh was proposed for passenger safety.  It will have a corpus of Rs one lakh crore, which will be built over a five-year period (Rs 20,000 crore per year).

The Standing Committee on Railways had noted that slow expansion of rail network has put undue burden on the existing infrastructure leading to severe congestion and safety compromises.2  Since independence, while the rail network has increased by 23%, passenger and freight traffic over this network has increased by 1,344% and 1,642% respectively.2  This suggests that railway lines are severely congested.  Further, under-investment in the sector has resulted in congested routes, inability to add new trains, reduction of train speeds, and more rail accidents.2  Therefore, avoiding such accidents in the future would also require significant investments towards capital and maintenance of rail infrastructure.2

Tags: railways, safety, accidents, finances, derailment, casualty, passengers, train

[1] Railways Year Book 2015-16, Ministry of Railways,

[2] “12th Report: Safety and security in Railways”, Standing Committee on Railways, December 14, 2016,

[3] Report of High Level Safety Review Committee, Ministry of Railways, February 17, 2012.

[4] “Utkal Express derailment: Four railway officials suspended as death toll rises to 22”, The Indian Express, August 20, 2017,

[5] Report of the Committee for Mobilization of Resources for Major Railway Projects and Restructuring of Railway Ministry and Railway Board, Ministry of Railways, June 2015,

Last month, Reserve Bank of India (RBI) released the report of the Expert Committee on Urban Co-operative Banks (Chair: Mr. N. S. Vishwanathan).  In this blog, we discuss some broader issues with the functioning and regulation of urban co-operative banks (UCBs), and some of the suggestions to address these as highlighted by the committee in its report.

Need for Urban Co-operative Banks

The history of UCBs in India can be traced to the 19th century when such societies were set up drawing inspiration from the success of the co-operative movement in Britain and the co-operative credit movement in Germany.  Urban co-operative credit societies, were organised on a community basis to meet the consumption-oriented credit needs of their members.  UCBs are primary cooperative banks in urban and semi-urban areas.  They are co-operative societies that undertake banking business.  Co-operative banks accept deposits from the public and lend to their members.  Co-operative banks are different from other co-operatives as they mobilise resources for lending and investment from the wider public rather than only their members.

Concerns regarding the professionalism of urban cooperative banks gave rise to the view that they should be better regulated.  Large cooperative banks with paid-up share capital and reserves of one lakh rupees were brought under the scope of the Banking Regulation Act, 1949 with effect from March 1, 1966.  Prior to this, such banks were regulated under the scope of state-specific cooperative laws.  The revised framework brought them under the ambit of supervision of the RBI.  Till 1996, these banks could lend money only for non-agricultural purposes.  However, this distinction does not apply today.  

The Expert Committee noted that UCBs play a key role in financial inclusion.  It further observed that the focus area for UCBs has traditionally been communities and localities including workplace groups.  They play an important role in the delivery of last-mile credit, even more so for those sections of the population who are not integrated into the mainstream banking framework.  UCBs primarily lend to wage earners, small entrepreneurs, and businesses in urban and semi-urban areas.  UCBs can be more responsive than formal banking channels to the needs of the local people.

Over the years, concerns have been raised about non-professional management in UCBs and that this can lead to weaker governance and risk management in these entities.  RBI has also taken regulatory action on several UCBs.  For instance, in September 2019, RBI placed Punjab and Maharashtra Co-operative Bank under restrictions on allegations of serious underreporting of non-performing assets.  The bank could not grant loans, make investments or accept deposits without prior approval from RBI.  While these restrictions were originally put in place for six months, the time frame was extended several times and has now been extended till December 31, 2021.  In addition, low capital base, poor credit management and diversion of funds have also been issues in the sector.

Shrinking share in the banking sector

There were 1,539 UCBs in the country as of March 31, 2020, with deposits worth Rs 5,01,180 crore and advances worth Rs 3,05,370 crore.   Even though 94% of the entities in the banking sector were UCBs their market share in the banking sector has been low and declining and stands at around 3%.  UCBs accounted for 3.24% of the deposits and 2.69% of the advances in the banking sector.  The Committee noted that state-of-the-art technology adopted by new players, such as small finance banks and fintech entities, along with commercial banks can disrupt the niche customer segment of the UCBs.

Figure 1:  Growth in deposits of UCBs (in Rs crore)

Source: Report of the Expert Committee on Urban Co-operative Banks; PRS.

Figure 2:     Growth in advances of UCBs (in Rs crore)

Source:  Report of the Expert Committee on Urban Co-operative Banks; PRS.

Burden of non-performing assets

UCBs had the highest net non-performing asset (NNPA) ratio (5.26%) and gross non-performing asset (GNPA) ratio (10.96%) across the banking sector as of March 2020.  These levels correspond to around twice that of private sector banks, and around five times that of small finance banks.  The Committee noted that, as of March 2020, UCBs have the lowest level of net interest margin (difference between interest earned and interest spent relative to total interest generating assets held by the bank) and negative return on assets and return on equity. 

Figure 3: Asset quality across banks (in percentage)

Sources:   Report of the Expert Committee on Urban Co-operative Banks; PRS.

Supervisory Action Framework (SAF):  SAF envisages corrective action by UCB and/or supervisory action by RBI on breach of financial thresholds related to asset quality, profitability and level of capital as measured by Capital to Risk-weighted Asset Ratio (CRAR).  The Committee recommended that SAF should consider only asset quality (based on net non-performing asset ratio) and CRAR with an emphasis on reducing the time spent by a UCB under SAF.  The RBI should begin the mandatory resolution process including reconstruction or compulsory merger as soon as a UCB reaches the third stage under SAF (CRAR less than 4.5% and/or net non-performing asset ratio above 12%).

Constraints in raising capital

The Committee also observed that UCBs are constrained in raising capital which restricts their ability to expand the business.  According to co-operative principles, share capital is to be issued and refunded only at face value.  Thus, investment in UCBs is less attractive as it does not lead to an increase in its value.   Also, the principle of one member, one vote means that an interested investor cannot acquire a controlling stake in UCBs.  It was earlier recommended that UCBs should be allowed to issue fresh capital at a premium based on the net worth of the entity at the end of the preceding year.

Listing of securities:  The Committee recommended making suitable amendments to the Banking Regulation Act, 1949 to enable RBI to notify certain securities issued by any co-operative bank or class of co-operative banks to be covered under the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992.  This will enable their listing and trading on a recognised stock exchange.   Until such amendments are made, the Committee recommended that banks can be allowed to have a system on their websites to buy/sell securities at book value subject to the condition that the bank should ensure that the prospective buyer is eligible to be admitted as a member.   

Conflict between Banking Regulation Act, 1949 and co-operative laws 

The fundamental difference between banking companies and co-operative banks is in the voting rights of shareholders.  In banking companies, each share has a corresponding vote.  But in the case of co-operative banks, each shareholder has only one vote irrespective of the number of shares held.  Despite RBI being the regulator of the banking sector, the regulation of co-operative banks by RBI was restricted to functions related directly to banking.  This gave rise to dual regulation with governance, audit, and winding-up related functions regulated by state governments and central government for single-state banks and multi-state banks, respectively.  

2020 Amendments to the Banking Regulation Act: In September 2020, the Banking Regulation Act, 1949 was amended to increase RBI’s powers  over the regulation of co-operative banks including qualifications of management of these banks and supersession of board of directors.  The Committee noted that due to the amendment of the Act, certain conflicts have arisen with various co-operative laws.  For instance, the Act allows co-operative banks to issue shares at a premium, but it is silent on their redemption.  It noted that if any co-operative societies’ legislation provides for redemption of shares only at par, then, while a co-operative bank incorporated under that legislation can issue shares at a premium, it can redeem them only at par.   

Note that on September 3, 2021, the Madhya Pradesh High Court stayed a circular released by the RBI on appointment of managing director/whole-time director in UCBs.  The circular provided for eligibility and propriety criteria for the appointment of such personnel in UCBs.  The petitioner, Mahanagar Nagrik Sahakari Bank Maryadit, argued that the service conditions of the managing director and chief executive officer of co-operative banks are governed by bye-laws framed under the M.P. State Cooperative Societies Act, 1960.  The petition noted that co-operative as a subject falls under the state list and hence the power to legislate in the field of co-operative societies falls under the domain of the states and not the central government.

Umbrella Organisation

Over the years, several committees have looked at the feasibility to set up an Umbrella Organisation (UO) for UCBs.  It is an apex body of federating UCBs.  In 2011, an expert committee on licensing of new UCBs recommended that there should be two separate UOs for the sector.  In June 2019, RBI granted an in-principle approval to National Federation of Urban Co-operative Banks and Credit Societies Ltd to set up a UO in the form of a non-deposit taking non-banking finance company.  The UO is expected to provide information technology and financial support to its federating members along with value-added services linked to treasury, foreign exchange and international remittances.   It is envisaged to provide scale through network to smaller UCBs.  The report of the current Committee recommended that the minimum capital of the UO should be Rs 300 crore.  Once stabilised, the UO can explore the possibility of becoming a universal bank.  It can also take up the role of a self-regulatory organisation for its member UCBs.  The Committee also suggested that the membership of the UO can be opened-up to both financial and non-financial co-operatives who can make contributions through share capital in the UO.

Comments on the report of the Expert Committee are invited until September 30, 2021.