Co-op banks come under RBI purview

New Delhi: Parliament on Tuesday passed amendments to the Banking Regulation Act to bring cooperative banks under the supervision of the RBI, a move aimed at protecting the interest of depositors. The Banking Regulation (Amendment) Bill, 2020, which replaces an ordinance that was promulgated on June 26, was passed by a voice vote in the Rajya Sabha.

The amendment had received approval from the Lok Sabha on September 16. The Bill, which comes in the backdrop of the PMC Bank scam, seeks to strengthen cooperative banks by increasing their professionalism, enabling access to capital, improving governance and ensuring sound banking through the Reserve Bank of India (RBI).

Replying to a short debate on the Bill in the Rajya Sabha, Finance Minister Nirmala Sitharaman said, "in the last one-and-a-half to two years, we came to know of so many cooperative banks or cooperative societies functioning as banks and calling themselves as banks falling into difficulties.

The minister said the amendments to the Banking Regulation Act have been brought to completely protect the interest of depositors. Amendments are coming in with a singular objective of protecting the interests of the depositors."

The government was able to quickly resolve the crisis at Yes Bank as it was governed by commercial bank rules, but resolution for the PMC Bank crisis is yet to be found, she pointed out. Within a matter of two weeks, everything was sorted out for Yes Bank which was governed by the commercial bank rules, "whereas, even till today, the PMC Bank solutions are not completely emerging, thus putting the depositors into difficulty," the minister said.