The Banking Regulation (Amendment) Bill, 2020
INTRODUCED BY
Introduced by
Ms Nirmala Sitharaman
Minister of Finance
SYNOPSIS
The bill suggests bringing cooperative banks under the supervision of the RBI, to safeguard the interest of depositors. This will also keep a check on cooperative banks functioning, fraud committed by these banks and will further strengthen the laws and rules for operation.
HIGHLIGHT
Salient Points ()
Regulation on functioning of cooperative banks
To bill regulates the functioning of cooperative banks and provides details with on all the regulatory aspects
- Granting of the licence
- Maintaining cash reserve
- Statutory liquidity and capital adequacy ratios
- Inspection of these banks.
Role of RBI
- Cooperative banks will be audited according to RBI’s norms
- RBI has the right to supersede the board of the cooperative bank, in consultation with the state government, in case of problems.
- Chief executive appointment will need permission from the banking regulator
- The audit of these banks will be done as per the guidelines issued by the central bank
Recruitment for Cooperative banks
- Management recruitment for these cooperative will be based on the set procedure and qualification as per RBI guidelines
- The suggested amendments will be applicable to all urban co-operative banks and multi-state cooperative banks.
Issue of Share Equity
A cooperative bank is allowed to issue equity, preference, or special shares on face value or at a premium to its members, via a public issue or private placement
Exceptions to the Bill
Proposed amendments are not applicable to Agriculture credit societies and Cooperative land mortgage banks, whose primary objective to provide loan for agricultural development
BACKGROUND
Background Basics ()
- The PMC (Punjab and Maharashtra cooperative) bank crisis which happened recently has triggered for stronger laws and rules.
- PMC Bank fraud had put a lot of small depositors in difficulty
There is a need for better management and governance of these cooperative banks.
The number of frauds through these cooperative banks have seen a rise over the last few years.
The entire banking system needs clean-up due to financial irregularities and to restore the trust of depositors and investors in the banking system.
KEY STATS
Key Stats ()
Total cooperative banks in India
Number of account holders in cooperative banks
Total deposit in co-op banks
Fraud amount reported during the last 5 years
Number of fraud cases reported in the last 5 years
TIMELINES
Bill Introduced in Lok Sabha
Bill passed in Lok Sabha
Bill passed in Rajya Sabha
WHY (as per the govt.)
Salient Points ()
To provide more powers to the RBI for regulating cooperative banks
The bill seeks to strengthen cooperative banks by increasing professionalism, enabling access to capital, improving governance and "ensuring sound banking" through Reserve Bank of India.
To bring cooperative banks on par with developments in the banking sector to ensure that the affairs of the co-operative banks are conducted in a manner that protects the interests of the depositors.
MEDIA SAYING
Media Saying ()
VIDEOS
Videos ()
FAQs
Cooperative banks are financial entities established on a co-operative basis and belonging to their members. This means that the customers of a cooperative bank are also its owners.
Cooperative banks are made to has been to serve the people and fill in the void in the absence of a formal banking sector in the past.
The higher management of the PMC bank has given a huge loan to the Housing Development and Infrastructure Ltd (HDIL) and its group entities. More than 70% of the credit facilities of the PMC bank have been transferred to HDIL and its associated companies.
And the bank allegedly favoured to the promoters of Housing Development and Infrastructure Ltd (HDIL) and allowed them to operate password-protected ‘masked accounts’.
The bank opened around 21,049 bogus accounts to conceal 44 loan accounts. The bank’s software was also tampered to conceal these loan accounts.
Responses