Finance Minister Nirmala Sitharaman presented the 2020 Banking Regulation Bill (Amendment) for discussion at the Lok Sabha on Wednesday. The amendment aims to bring cooperative banks under the supervision of the Reserve Bank of India to protect the interests of depositors.
“We are trying to introduce this amendment to protect depositors. As in some unfortunate situation in banks, depositors are facing difficulties,” the finance minister said at the Lok Sabha on Wednesday.
“The financial status of 277 urban cooperative banks is weak, 105 cooperative banks cannot meet the minimum regulatory capital requirement. 47 banks have negative net worth,” he added, adding that 328 urban cooperative banks have a higher gross delinquency rate. at 15%. .
With the amendments, RBI will be able to undertake a bank merger scheme without placing it in default. Before this amendment, if a lender was subject to the moratorium, it not only limited withdrawals from depositors, but also prohibited a bank’s loan operations.
Few more amendments have been proposed under section 45 of the act that will help the central bank develop a scheme to ensure the interest of the public, the banking system, account holders in the bank, and the proper management of the banking business, without disrupt any banking functionality. However, the changes will not affect the existing powers of state cooperative partnership registrars under state law.
“For the last two years, depositors in cooperative banks and small banks are facing problems. We are trying to bring this amendment to protect depositors. Because these banks have fallen into difficult days thus requiring the regulator to impose a moratorium and solving the problem seems to be time consuming, ”said the finance minister.
The government presented a bill in the Lok Sabha on Monday to amend the Banking Regulation Law. “During the budget session in March, we presented this bill for amendments to be made to serve the interest of depositors. But, unfortunately, during the budget session, we were unable to pass this bill,” he added Sitharaman. .
In June, the union cabinet approved the ordinance to put 1,482 urban cooperative banks and 58 multi-state banks under the supervision of the central bank. Sitharaman said the government had to pass an ordinance because the financial health of many of the cooperative societies, which also function as banks, “was becoming very delicate.”
He said the bill will not apply to “a primary agricultural credit society or a cooperative society whose main object and main business is to provide long-term financing for agricultural development if said society does not use as part of its name, or in connection to your business, the words ‘bank’, ‘banker’ or ‘banking’ and does not act as a check drawer. “
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