The new rules will be applicable to both 1,482 urban cooperative banks and 58 multi-state cooperative banks, assuring 8.6 crore depositors that their money - amounting to Rs 4.84 lakh crore - will stay safe.
After the Union Cabinet decided to bring all cooperative banks under the supervision of the Reserve Bank of India, President Ram Nath Kovind today put the new ordinance into effect. The ordinance has amended the Banking Regulation Act, 1949, which seeks to protect the interests of depositors and strengthen cooperative banks by improving governance and oversight by extending powers already available with RBI, said a statement by the Ministry of Finance. The move is aimed towards ensuring professionalism and helping cooperative banks to access the capital, the ministry added. After the Punjab and Maharashtra Cooperative (PMC) Banks fiasco last year, the government amended the Banking Regulation Act to strengthen the cooperative banks in the country.
The new ordinance passed will provide better management and sound regulation of cooperative banks and facilitates making of reconstruction or amalgamation schemes in the interest of public, depositors, banking, and proper banking company management, the Finance Ministry said in a tweet. The new rules will be applicable to both 1,482 urban cooperative banks and 58 multi-state cooperative banks, assuring 8.6 crore depositors that their money – amounting to Rs 4.84 lakh crore – will stay safe, it added.
However, the new ordinance will not affect the existing powers of the state registrars of cooperative societies and the amendments do not apply to Primary Agricultural Credit Societies (PACS) or cooperative societies whose primary object and principal business is long-term finance for agricultural development. Meanwhile, during Budget 2020, Finance Minister Nirmala Sitharaman also announced that cooperative banks will be brought under the ambit of RBI. After the PMC bank extended fraudulent loans to Housing Development & Infrastructure Ltd (HDIL), putting the deposits of several customers at risk, the government decided to take a step towards avoiding such incidents in the future.