No violation of any law in bringing cooperative banks under supervisory control: RBI

The Reserve Bank of India (RBI) has said that there is no violation of any law of the nation in bringing the cooperative banks under its supervisory control. In an affidavit filed in the Madras High Court on Monday, October 19, 2020, the RBI has said, the recent legislation enacted in Parliament is aimed at regulating banking.

It further said that the law is aimed at safeguarding the interests of the depositors and the public. It said, the laws governing the cooperatives vary from state to state and therefore, the banking activities being done by them require a national law.

The division bench of the Madras High Court comprised of Chief Justice AP Sahi and Justice Senthilkumar Ramamoorthy was hearing the plea filed by two of the state's oldest co-operative banks that challenged the Ordinance to bring such banks under the RBI ambit. The two co-operative banks are Big Kancheepuram Co-operative Town Bank Ltd and Velur Co-operative Urban Bank Ltd.

RBI further said, the RBI is empowered to regulate any banking activity including those by the cooperative bodies. It pointed out that 430 urban cooperative banks in the country have lost their banking licenses due to very poor financial positions.

Earlier, two cooperative banks in Tamil Nadu filed the petitions against the Central Government ordinance bringing them under the RBI control. The ordinance has since been replaced by law. Banking Regulation (Amendment) Bill, 2020, which seeks to bring cooperative banks under the supervision of the RBI has replaced the ordinance that was issued on June 26, 2020.