PMC scam effect: Ordinance to bring cooperative banks under RBI regulation notified

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June 28, 2020 3:30 AM

The Banking Regulation Act (amendment) Ordinance enables cooperative banks to raise money via public issue and private placement, of equity or preference shares and unsecured debentures, subject to the central’s bank’s approval.

Cooperative banks’ ordinance newsCooperative banks’ ordinance has been notified

THE GOVERNMENT ON Saturday notified a proposed ordinance to bring urban as well as multi-state cooperative banks under the RBI regulation and make it easier for them to access capital. The idea is to protect the interests of depositors and better scrutinise the affairs of these cooperative banks following the Punjab Maharashtra Cooperative (PMC) Bank crisis.

The Banking Regulation Act (amendment) Ordinance enables cooperative banks to raise money via public issue and private placement, of equity or preference shares and unsecured debentures, subject to the central’s bank’s approval. Under the extant norms, cooperative banks’ access to capital is limited.

In a statement, the government said: “The Ordinance seeks to protect the interests of depositors and strengthen cooperative banks by improving governance and oversight by extending powers already available with the RBI in respect of other banks to cooperative banks as well for sound banking regulation.”

Enhanced borrowing limit under MSF extended

THE RBI HAS decided to extend the enhanced borrowing facility provided to the banks to meet their liquidity shortages till September 30. The RBI, as a temporary measure, had increased the borrowing limit of scheduled banks under the marginal standing facility (MSF) scheme from 2% to 3% of their Net Demand and Time Liabilities (NDTL) with effect from March 27, 2020. This relaxation, which was granted till June 30, 2020, has now been extended till September 30.

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