Lok Sabha passes bill to bring co-operative banks under RBI supervision

Lok Sabha passes bill to bring co-operative banks under RBI supervision

Protecting depositors’ interests, the Lok Sabha on Wednesday passed the Banking Regulation (Amendment) Bill, 2020, to bring co-operative banks under the supervision of the Reserve Bank of India (RBI). Finance minister Nirmala Sitharaman assured the House that the legislation empowers the central bank to regulate only the banking activities of co-operatives and it is not applicable to a primary agricultural credit society or a co-operative society providing finance for agricultural development. The Bill is not to “undermine” the importance of co-operatives, she said. “But, if a co-operative is performing banking functions, there is a need to regulate it... so that it functions professionally,” she said while replying to queries raised by members. The amendments do not affect existing powers of the state registrars of co-operative societies under state co-operative laws. Referring to the woes of depositors of Mumbai-headquartered Punjab and Maharashtra Cooperative Bank (PMC) and Bengaluru-based Sri Guru Raghavendra Co-operative Bank due to their lack of professionalism, she said while 430 co-operative banks faced liquidation in the last two decades, not a single commercial bank, whose depositors are protected by the Banking Regulation Act, have gone for liquidation. The legislation also enables making of a scheme of reconstruction or amalgamation of a banking entity for protecting the interest of depositors without resorting to moratorium that freeze withdrawals by depositors. The Bill replaces an ordinance that was promulgated in pursuance of the commitment “to ensure safety of depositors across banks” by the President on June 26. Sitharaman said the government was compelled to come out with ...
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