Urban Cooperative, Multi-State Co-Op Banks to be Brought Under RBI Supervision Through Ordinance: Govt
All urban cooperative and multi-state co-op banks would be brough under the supervision of Reserve Bank of India (RBI) and the central government would issue an ordinance for this, says Prakash Javdekar, union minister for environment, forest & climate change; information & broadcasting and heavy industries & public enterprises.
Briefing the media after the cabinet meeting, Mr Javadekar says, "The cabinet decision to issue an ordinance for bringing 1,540 cooperative banks under RBI's supervision will give an assurance to more than 8.6 crore depositors in these banks that their money amounting to Rs4.84 lakh crore will stay safe."
As per the minister, banks, including 1,482 urban cooperative banks and 58 multi-state cooperative banks, would be brought under the supervisory powers of RBI. With the new ordinance, RBI's powers as it applies to scheduled banks would apply for cooperative banks as well.
In terms of regulatory power, the RBI had limited control over cooperative banks, thereby, increasing the risk on the depositors.
At present, there are various types of cooperative banks, which come under different central and state regulations.
The development assumes significance after last year's multi-crore fraud in Punjab and Maharashtra Cooperative ((PMC) Bank.
In February, the government amended the Banking Regulation Act to give RBI more regulatory powers over cooperative banks.
However, these amendments failed to be passed through the Budget session due to Covid-19 outbreak.
Currently, the RBI can not audit these banks or give its consent for the appointment of the cooperative bank's chief executive (CEO), without these new powers.
The cabinet also approved a scheme for interest subvention of 2% to SHISHU loan category borrowers under Pradhan Mantri Mudra Yojana (PMMY). "It will be of great benefit to 9.37 crore people and the scheme will be effective from 1 June 2020 till 31 May 2021," Mr Javdekar informed.