The Cabinet also authorized a rupee 15,000 crore fund for animal husbandry announced as part of Atmanirbhar Bharat Abhiyan’s stimulus package, and approved previously announced reforms in the space sector to boost private sector participation and the modernization of Kushinagar airport in Uttar Pradesh internationally.
As a result of the cabinet decision, 1,482 urban cooperative banks and 58 multi-state cooperative banks will come under central bank supervision, which would mean tighter supervision.
The RBI’s powers over listed banks would therefore also be applicable to cooperative banks. “The decision to place 1,540 cooperative banks under the supervision of the RBI will assure more than 8.6 crore depositors in these banks that their money amounting to Rs 4.84 lakh crore will remain safe,” he said. said Union Minister Prakash Javadekar. Banks will be placed under the supervision of the RBI with immediate effect from the date of the President’s approval of the ordinance.
Cooperative banks have long been a weak link in the financial system due to a lack of adequate supervision. While the RBI regulates and oversees banking functions, primary oversight has been exercised by the Registrar of Companies. The Union cabinet approved in February this year an amendment to the Banking Regulation Act to make cooperative banks subject to the RBI. The ordinance will implement the provisions immediately while the law is amended in Parliament. The proposal was announced in this year’s budget.
The Cabinet also approved a 2% interest subsidy program for borrowers in the “shishu” loan category for one year under the Pradhan Mantri Mudra Yojana. This amount will be available for the outstanding amount as of March 31, 2020. As of that date, around 93.7 million loan accounts with a total loan amount of around Rs 1.62 lakh crore were in circulation according to official figures.
“The program was formulated as a specific response to an unprecedented situation and aims to alleviate the financial stress of borrowers at the ‘bottom of the pyramid’ by reducing the cost of credit,” the government said in a statement. In the shishu category, the Micro-unit Development and Refinancing Agency (Mudra) grants up to Rs 50,000 loans to micro-enterprises.
The Rs 15,000 crore Animal Husbandry Infrastructure Development Fund (AHIDF) is expected to help invest in infrastructure in dairy, meat processing and animal feed factories. Its eligible beneficiaries include agricultural producer organizations, micro, small and medium enterprises (MSMEs), private companies and individual entrepreneurs with a contribution of only 10% in margin money. The remaining 90% would be bank loans. “The measures would also contribute to the direct and indirect creation of livelihoods for around 35 lakhs,” an official said.