Lok Sabha passes bill to bring cooperative banks under RBI's supervision

In a bid to protect interest of depositors, Lok Sabha on Wednesday passed an amendment to Banking Regulation Act to bring cooperative banks under supervision of RBI. Banking Regulation (Amendment) Bill, 2020 replaces an ordinance that was promulgated on June 26.

bill, which comes in backdrop of PMC Bank scam, seeks to strengn cooperative banks by increasing ir professionalism, enabling access to capital, improving governance and ensuring sound banking through RBI.Replying to debate on bill in Lok Sabha, Finance Minister Nirmala Sitharaman said this legislation is for depositors' safety and t for undermining powers of Registrar of Cooperative Societies.

Powers of Registrar of Cooperative Societies have t been encroached upon but banking activity of cooperatives will be regulated by Reserve Bank of India (RBI), she said.

"I want to make it very clear that this bill does t provide for regulation of cooperative banks by central government.. We are t doing anything new, we are working in interest of depositors," she ded.

amendment is t for central bank to take over control of cooperative banks, she said. Clarifying on need for ordinance, finance minister said, "Absolutely re was a need for it. One was t sure when will be next session of Parliament because of COVID-19 pandemic, and in meanwhile, protection of depositors is of critical importance." Moreover, re was rise in n-performing assets (NPAs) of cooperative banks, Sitharaman said.

As per annual financial data me available before June, re was an increase in gross NPA ratio of urban cooperative banks to 10 per cent in 2019-20 as against 7 per cent in 2018-19, she ded.

finance minister emphasised that government has t forgotten success of cooperative movement, but ded if cooperatives are providing banking services, n several committees have recommended that re is a need to regulate m.

"It's t as if we have forgotten success of cooperative movement. We are t undermining, but we must face truth that in last two deces, 430 cooperative banks have been delicensed and y have gone into liquidation," she said.

In contrast, t a single commercial bank in same period whose depositors are protected by banking laws have gone into liquidation...so it should t be construed as we are stepping into terrains of states,she ded.Opposition parties h protested against bill, saying it infringed upon states' rights.

We don't undermine anybody, but if depositors are suffering we have to stand with m...We are bringing this law to safeguard interest of depositors,Sitharaman ded.

proposed law seeks to enforce banking regulation guidelines of RBI in cooperative banks, while ministrative issues will still be guided by Registrar of Cooperatives.It is aimed at bringing cooperative banks on par with developments in banking sector through better manment and proper regulation which protects interest of depositors.

bill assumes significance in wake of a scam in Punjab and Maharashtra Cooperative (PMC) Bank affecting lakhs of customers who have been facing difficulty in withdrawing ir money due to restrictions imposed by RBI. PMC Bank was found to have given over Rs 6,700 crore loan to a single realty company HDIL through allegedly fraudulent means and also hid exposure from RBI by creating separate books of accounts.

re are about 1,540 cooperative banks with depositor base of 8.60 crore having total savings of around Rs 5 lakh crore. 

(Im Credits:PTI)