The Union Cabinet on Wednesday decided to bring all cooperative banks under the Reserve Bank of India through an ordinance. Union Information and Broadcasting Minister Prakash Javadekar addressed the media briefing on Cabinet decision from his residence, saying “this is the new normal”.
The union minister said during the virtual press meet after the meeting that depositor will be assured his money is safe. “Government banks, including 1,482 urban cooperative banks and 58 multi-state cooperative banks, are now being brought under supervisory powers of Reserve Bank of India (RBI),” said Javadekar.
Note that these banks will come under the supervision of RBI with immediate effect from the date of President’s approval on the ordinance. There are about 1,482 crore urban cooperative banks and 58 multi-state co-operative banks with a depositors base of about 8.6 crore.
It is worth mentioning that after the Punjab and Maharashtra Cooperative (PMC) Banks fiasco last year that left thousands of people in distress, the Union Cabinet in February amended Banking Regulation Act to strengthen the cooperative banks in the country.
During Budget 2020, Finance Minister Nirmala Sitharaman proposed that cooperative banks will be brought under the ambit of RBI.
However, the Banking Regulation (Amendment) Bill, 2020, could not be passed in the Budget session of the parliament, since it had to be curtailed due to COVID-19 pandemic. “Depositors’ money amounting to ₹4.84 lakh crore in the cooperatives banks will stay safe,” Javadekar said while announcing the decision.
According to the new dispensation, the appointment of CEOs in cooperative banks will now require prior approval from the regulatory authority meaning the RBI. The government has said earlier this year that there was a need to enhance the accountability of these banks which hold public money and are often riddled in controversies around mismanagement, frauds and corruption.