New Delhi, June 24
The government said on Wednesday that all urban cooperative banks and multi-state cooperative banks would come under the supervision of the Reserve Bank of India, a development aimed at comforting depositors and preventing a repeat of PMC Bank scams.
The Indian president will issue an ordinance to this effect, Information and Broadcasting Minister Prakash Javadekar told reporters after the Union Cabinet meeting.
Calling it a landmark decision, the minister said that 1,540 urban cooperative banks and multi-state cooperative banks would be subject to the RBI oversight process, as is applicable in the case of scheduled commercial banks.
“… depositors (of cooperative banks) will benefit from protection and will benefit from this decision,” Javadekar said.
There are 1,482 urban cooperative banks and 58 multi-state cooperative banks with approximately 8.6 crore depositors with a total savings deposit of around Rs 4.85 lakh crore.
The move gains momentum following a scam at the Punjab and Maharashtra Cooperative Bank (PMC) and other cooperative banks affecting hundreds of thousands of customers who have difficulty withdrawing their money due to the restrictions imposed by the Reserve Bank of India.
The RBI had placed regulatory restrictions on PMC Bank on September 23, 2019, after discovering certain financial irregularities and misrepresentation of loans made to property developer HDIL.
Earlier this month, the RBI imposed restrictions on withdrawals from the People’s Co-operative Bank, Kanpur, Uttar Pradesh.
The Minister of Finance, Nirmala Sitharaman, presented to Lok Sabha on March 3, 2020, the banking regulation (amendment) bill which is pending approval. The bill sought to enforce the RBI’s banking regulatory guidelines on cooperative banks.
In his February 1 budget speech, Sitharaman proposed changes to the Banking Regulation Act aimed at increasing professionalism and improving governance among cooperative banks. PTI