The Reserve Bank of India (RBI) on 24th November superseded the board of Mumbai-based Abhyudaya Cooperative Bank for a year, citing material concerns owing to poor governance standards.
Key points
- These actions were done under Section 36 AAA read with Section 56 of the Banking Regulation Act, 1949.
- Under Section 36AAA, RBI can supersede the board if satisfied in the public interest or for preventing a multi-State cooperative bank being run in a manner detrimental to the interest of the depositors, among others.
- The RBI can supersede the board of directors of such a multi-state cooperative bank for up to five years.
- In recent years, RBI has taken strict action against erring cooperative banks.
- The government amended the Banking Regulation Act (as applicable to cooperative societies) after the fiasco at the erstwhile Punjab and Maharashtra Cooperative (PMC) Bank.
- The amendment, first issued as an ordinance in June 2020, gave RBI supervisory powers over cooperative banks.
- In accordance to the provisions of Section 23 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies), main (urban) cooperative banks are required to obtain permission from the Reserve Bank of India for opening branches.
- The RBI can cancel the licence of cooperative banks.
