Bill for co-operative banks under RBI watch slated for Parliament session
[ by Kavita Krishnan ]To avoid replication of scams such as the one at PMC Bank in the cooperative banks sector, the Parliament session beginning on Monday is likely to clear a bill bringing these banks under the regulation of Reserve Bank of India (RBI).The Bill seeks to amend the Banking Regulation Act to bring multi-state co-operative banks under effective regulation of RBI during the...
To avoid replication of scams such as the one at PMC Bank in the cooperative banks sector, the Parliament session beginning on Monday is likely to clear a bill bringing these banks under the regulation of Reserve Bank of India (RBI).
The Bill seeks to amend the Banking Regulation Act to bring multi-state co-operative banks under effective regulation of RBI during the Budget session.
The proposed legislation seeks to prevent recurrence of scams seen in banks such as Punjab and Maharashtra cooperative banks, among others.
It is estimated that there are 1,540 co-operative banks with a depositor base of 86 million having total savings of about Rs. 5 lakh crore.
The Bill comes on the heels of a Cabinet decision in February which gave approval to amend the Banking Regulation Act. The Bill in this regard is likely to be passed during the second leg of Budget session starting Monday. The session ends on April 3. The Cabinet decision seeks to create a framework where cooperative banks follow the regulatory ambit under which the scheduled commercial banks fall.
The move is expected to ensure greater accountability and transparency in the functioning of co-operative banks. Under this new dispensation, the co-operative banks need to fulfil regulatory requirements set for scheduled commercial banks.
The Department of Financial Services has in the last couple of years, taken several steps to promote responsive and responsible banking. As part of clean banking initiative, project cash flows were ring-fenced, enforcement of terms of loan agreements and prior validation of backward and forward linkages were made integral to lending processes.
To further augment the confidence of customers, the government has increased deposit insurance cover to Rs.5 lakhs to ensure security of public money in banks.
The provisions in the proposed Bill would give the apex bank the power to take control of weak co-operative banks. As per the new proposals, co-operative banks will need to take RBI approval for the appointment of CEO and do audits as per RBI guidelines.