The Union Cabinet on February 5, 2020 approved amendments to the Banking Regulation Act to bring 1,540 cooperative banks under the Reserve Bank of India (RBI) regulation. The objective behind this amendment is to prevent frauds such as the one seen at Punjab and Maharashtra Co-operative Bank Ltd.
Proposed amendments, subject to approval from Parliament
- Administrative matters would continue to be under the Registrar, Cooperative. However, cooperative banks would be regulated under the RBI’s banking guidelines.
- Auditing would also be done as per its norms.
- Qualifications would be laid down for appointments, including that of Chief Executive Officers.
- Prior permission from the RBI would be required for the appointment of key positions.
- The regulator would deal with issues such as loan waivers. The RBI would also have powers to supersede the board of any cooperative bank in financial distress.
Current Situation
- Cooperative banks have 8.6 lakh account holders, with a total deposit of about ₹5 lakh crore.
- Cooperative banks are currently under the dual control of the Registrar of Cooperative Societies and RBI.
- While the role of registrar of cooperative societies includes incorporation, registration, management, audit, supersession of board and liquidation, RBI is responsible for regulatory functions such maintaining cash reserve and capital adequacy, among others.
