New Delhi: The Lok Sabha on Wednesday (September 16) handed an modification to the Banking Regulation Act to deliver cooperative banks beneath the supervision of the RBI. The Banking Regulation (Modification) Invoice, 2020 replaces an ordinance that was promulgated on June 26.
The invoice, which comes within the backdrop of the PMC Financial institution rip-off, seeks to strengthen cooperative banks by growing their professionalism, enabling entry to capital, enhancing governance and making certain sound banking by means of the RBI.
The proposed regulation seeks to implement banking regulation pointers of the RBI in cooperative banks, whereas administrative points will nonetheless be guided by the Registrar of Cooperatives.
It’s geared toward bringing cooperative banks on par with developments within the banking sector by means of higher administration and correct regulation which protects the curiosity of depositors.
The invoice assumes significance within the wake of a rip-off within the Punjab and Maharashtra Cooperative (PMC) Financial institution affecting lakhs of consumers who’ve been going through problem in withdrawing their cash on account of restrictions imposed by the RBI.
The PMC Financial institution was discovered to have given over Rs 6,700 crore mortgage to a single realty firm HDIL by means of allegedly fraudulent means and in addition hid the publicity from the RBI by creating separate books of accounts.
There are about 1,540 cooperative banks with a depositor base of 8.60 crore having complete financial savings of round Rs 5 lakh crore.
Replying to the talk on the invoice within the Lok Sabha, Finance Minister Nirmala Sitharaman mentioned this laws is for depositors’ security and never for undermining powers of the Registrar of Cooperative Societies.
Powers of the Registrar of Cooperative Societies haven’t been encroached upon however the banking exercise of cooperatives can be regulated by the Reserve Financial institution of India (RBI), she mentioned.
She mentioned, “I need to make it very clear that this invoice doesn’t present for regulation of cooperative banks by the central authorities.. We aren’t doing something new, we’re working within the curiosity of depositors,” including that the modification shouldn’t be for the central financial institution to take over management of cooperative banks.
Clarifying the necessity for the ordinance, the finance minister mentioned, “Completely there was a necessity for it. One was unsure when would be the subsequent session of Parliament due to COVID-19 pandemic, and in the mean time, the safety of depositors is of vital significance.”
Furthermore, there was rise in non-performing belongings (NPAs) of the cooperative banks, Sitharaman mentioned.
As per the annual monetary knowledge made obtainable earlier than June, there was a rise in gross NPA ratio of city cooperative banks to 10 per cent in 2019-20 as towards 7 per cent in 2018-19, she added.
The finance minister emphasised that the federal government has not forgotten the success of the cooperative motion, however added if cooperatives are offering banking companies, then a number of committees have advisable that there’s a want to manage them.
“It isn’t as if we’ve got forgotten the success of the cooperative motion. We aren’t undermining, however we should face the reality that within the final twenty years, 430 cooperative banks have been delicensed and so they have gone into liquidation,” she mentioned.
“In distinction, not a single business financial institution in the identical interval whose depositors are protected by the banking legal guidelines have gone into liquidation…So it shouldn’t be construed as we’re moving into the terrains of the states,” she added.
“We do not undermine anyone, but when depositors are struggling we’ve got to face with them…We’re bringing this regulation to safeguard curiosity of depositors,” Sitharaman added.