Recently, President Ram Nath Kovind has promulgated the Banking Regulation (Amendment) Ordinance, 2020. This was done to bring all urban cooperative banks, multi-state cooperative banks under the administration of the RBI. This will protect the interest of depositors.
The new Ordinance amends the Banking Regulation Act, 1949. Also, this is applicable to cooperative banks, an official statement stated.
The changes aim to protect the interests of depositors and strengthen cooperative banks. This will be done by improving governance and oversight by extending powers already available with RBI. Moreover, the powers involve those in respect of other banks to Co-operative Banks as well for sound banking regulation. Hence, ensuring professionalism and enabling their access to capital.
The changes do not affect existing powers of the State Registrars of Co-operative Societies under state co-operative laws. Further, the changes do not apply to Primary Agricultural Credit Societies (PACS) or co-operative societies. This refers to the ones whose primary object and principal business is long-term finance for agricultural development. Also, which do not use words such as a bank, banker or banking and do not act as drawers of cheques.
The Ordinance makes changes to Section 45 of the Banking Regulation Act, to unleash making of a scheme of reconstruction or amalgamation of a banking company. This aims to protect secure proper management, even without making an order of moratorium, so as to avoid disruption of the financial system.
The decision holds importance as numerous reports scams in cooperative banks have surfaced. This includes the Punjab and Maharashtra Cooperative (PMC) Bank, making it difficult lakhs of customers. These people are facing challenges while withdrawing their money due to restrictions imposed by the RBI.
In this month itself, the RBI restricted withdrawals from People’s Co-operative Bank, Kanpur, UP. Nirmala Sitharaman introduced the Banking Regulation (Amendment) Bill, 2020′ in the Lok Sabha on 3 March 2020, still pending. Also, the proposed bill aimed to enforce banking regulation guidelines of the RBI on cooperative banks. In her February Budget speech, Sitharaman had introduced amendments to the Banking Regulation Act seeking to increase professionalism and improving governance among the cooperative banks.