Cabinet approves amendment to bring cooperative banks under regulatory control of RBI
Union Cabinet today approved amendments to the Banking Regulation Act to bring the Cooperative banks under the regulatory mechanism of the Reserve Bank of India.
Union Cabinet today approved amendments to the Banking Regulation Act to bring the Cooperative banks under the regulatory mechanism of the Reserve Bank of India (RBI). Bringing the cooperative banks under the central banks regulation will help in preventing malpractices and ensure better regulation.
Briefing media persons after the Cabinet meeting, Information and Broadcasting Minister Prakash Javadkar said the move will ensure greater accountability and transparency in the functioning of Cooperative Banks. Mr Javedkar said Cooperative Banks need to fulfil regulatory requirements set for scheduled commercial banks.
The administrative role of these banks will be managed by the cooperative registrars. And, these banks will be, now, audited as per the RBI norms.
Cooperative Banks in India
Currently, there are 11,540 cooperative banks in India with 8.6 crore customers/depositors with Rs5 lakh crore deposits.
According to the amendments, the recruitments of these banks' management will be based on certain qualifications, while the appointment of the chief executive officer will require prior permission.
Need to bring these banks under RBI norms?
These amendments were proposed and approved after the collapse of the Punjab and Maharashtra Co-operative (PMC) Bank in 2019.
Urban Cooperative Banks and Frauds
PTI report that cites RBI says urban cooperative banks (UCBs) have reported around 1,000 cases of fraud in last five fiscals. These frauds collectively amount to Rs220 crore.
Besides, earlier Finance Minister Nirmala Sitharaman on February 1, 2020, during the presentation of the Union Budget 2020 presented a proposal to increase the limit of insurance cover in case of bank failure on deposits to Rs5 lakh from Rs1 lakh.