NEW DELHI: The Union Cabinet on Wednesday approved an amendment to the Banking Regulation Act that will empower the Reserve Bank of India to regulate 1,540 co-operative banks to protect the interest of depositors.
This move comes in the wake of the Punjab and Maharashtra Co-operative (PMC) Bank crisis.
Briefing media about the Cabinet’s decision, Information and Broadcasting Minister Prakash Javadekar said the proposed amendment will aim to enforce banking regulation guidelines of the RBI in co-operative banks, while administrative issues will still be guided by the registrar of co-operative.
This means that now the co-operative banks will be required to seek RBI nod before the appointment of CEO, as done in the case of commercial banks. The banks will also have to carry out audits according to the RBI guidelines. The provisions would give the banking regulator the power to supersede and take control of weak co-operative banks.
The Cabinet approval is in line with the Budget announcement by Finance Minister Nirmala Sitharaman on Saturday.
“To strengthen co-operative banks, amendments to the Banking Regulation Act are proposed for increasing professionalism, enabling access to capital and improving governance and oversight for sound banking through the RBI,” Sitharaman had said in her Budget speech last week.
The move was initiated in the backdrop of PMC Bank crisis affecting lakhs of customers facing difficulties in withdrawing money due to restrictions imposed by RBI. Currently, there are at least 1,540 co-operative banks with a depositor base of Rs 8.60 crore having total savings of about Rs 5 lakh crore.
The Cabinet also gave its nod for setting up a new major port at Vadhavan near Dahanu in Maharashtra at a cost of Rs 65,544.54 crore.
A special purpose vehicle (SPV) will also be formed with Jawaharlal Nehru Port Trust as the lead partner with equity participation equal to or more than 50 per cent to implement the project.