Lok Sabha passed Banking Regulation Amendment Bill on Wednesday. This Bill replaces an ordinance to the same effect promulgated on June 26. The Central Government now aims to bring cooperative banks under the supervision of the Reserve Bank of India (RBI).
The amendment of the Banking Regulation Act, 1949 was long due on the backdrop of Punjab & Maharashtra Cooperative (PMC) Bank scam. The cooperative banks is having 8.6 Lakh account holder with a total deposit of ₹5 lakh crore. Also to keep in mind the Urban cooperative banks reported nearly 1,000 cases of fraud worth more than ₹220 crore in past five fiscal years.
As per the changes, what provisions are applicable to the banking companies are now the same for the cooperative banks. The control over Cooperative Banks will help Central Bank to develop a scheme to ensure the interest of the public, banking system, account holders in the bank, and banking company’s proper management, without disrupting any banking functionalities.
Also, RBI will be able to undertake a scheme of amalgamation of a bank without placing it under moratorium. Adding to it cooperative banks can raise money via public issues and private placements of equity or preference shares as well as unsecured debentures, with the central’s bank’s permission.
However the changes will not affect the existing powers of the state registrars of co-operative societies under state laws and it’s applied to Primary Agricultural Credit Societies (PACS) or co-operative societies primary object and principal business is long-term finance for agricultural development, and which do not use the words “bank”, “banker” or “banking”.