- The new Banking Regulation (Amendment) Bill, 2020, introduced by the government on the first day of the Parliament’s Monsoon Session, provides the Reserve Bank of India (RBI) powers to restructure cooperative banks.
- The law seeks to protect the interest of the depositors by bringing co-operative banks under the regulatory framework of Reserve Bank of India (RBI).
- With the amendments, RBI will be able undertake a scheme of amalgamation of a bank without placing it under moratorium.
- Earlier, if a bank was placed under moratorium, it not only limited withdrawals by depositors, but also disrupted a bank’s lending operations.
- Cooperative banks have been under the dual control of cooperative societies as well as RBI.
- However, the changes will not affect the existing powers of the state registrars of co-operative societies under state laws.
- Nor will the changes apply to primary farm credit societies or cooperative societies, the main business of which is long-term finance for agricultural development.
- With the amendment, cooperative banks will be allowed
- to raise money via public issue and private placement, of equity or preference shares
- as well as unsecured debentures, with the central’s bank’s nod.
- Currently, access to capital for cooperative banks is limited.
- In March, finance minister Nirmala Sitharaman tabled in the Lok Sabha the amendments to the Banking Regulation Act, 1949.
- However, due to the outbreak of the covid-19, the Parliament could not approve the changes. Thereafter, on June 26, an ordinance was promulgated.