Union Finance Ministry Likely To Pass Ordinance To Expand Reserve Bank Of India’s Control Over Co-Operative Banks

The union finance ministry has received inputs from the Reserve Bank of India (RBI) for proposed amendments to the law through an ordinance, in order to amend the Banking Regulation Act, 1949.

The government is likely to take the ordinance route if the proposed Bill cannot be introduced in the ongoing winter session of the parliament which ends on December 13.

The proposed amendments are expected to give more power to the RBI to regulate co-operative banks in order to prevent episodes like the alleged PMC Bank fraud.

At the moment, co-operative banks are governed by dual regulations, namely state co-operative bodies and the RBI. While financial supervision comes under the ambit of the RBI, appointments are mostly looked after by state bodies.

The proposed amendments will ensure that the dual regulation goes away and RBI gets to become the sole regulator for urban co-operative banks.

Co-operative institutions play a crucial role in financial inclusion in both rural and urban areas.
According to an RBI report, there were 1,551 urban co-operative banks as on March 31, 2018 and 96,612 rural co-operative banks as on 31 March 2017, with the latter accounting for 65.8% of the total asset size of all cooperative banks.