NCP OPPOSES RBI SUPERVISION OF COOPERATIVE BANKS

NCP OPPOSES RBI SUPERVISION OF COOPERATIVE BANKS

Subject : Economy

Context : The changes to The Banking Regulation Act approved by Parliament in September 2020, brought cooperative banks under the direct supervision of the RBI

Concept :

• Before, all the co-operative banks came under dual regulation of the RBI and the Registrar of Co-operative Societies, resulting in regulatory and supervisory lapses at many of these banks.
• The RBI had no powers to draw up an enforceable scheme of reconstruction of a co-operative bank.
• However, from now onwards the urban and multi-state co-operative will come under the direct supervision of RBI.

Benefit:

• The move will empower the RBI to regulate all urban and multi-state co-operative banks on the lines of commercial banks.
• Earlier, the Supreme Court pronounced that co-operative banks come within the definition of ‘Banks’ under the Banking Regulation Act, 1949 for the purposes of the Sarfaesi Act, 2002.
• The Sarfaesi Act is an effective tool for bad loans (Non-Performing Assets) recovery.
• It will also provide more security to depositors.
• In India, there are 1482 urban co-operatives banks and 58 multi-state co-operative banks.
• These banks have a depositor base of 8.6 crores, who have saved a huge amount of Rs. 4.84 lakh crore with these banks.

Co-operative Banking

• A Co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. It is distinct from commercial banks.
• They are broadly classified into Urban and Rural co-operative banks based on their region of operation.
• They are registered under the Co-operative Societies Act of the State concerned or under the Multi-State Co-operative Societies Act, 2002.
• The Co-operative banks are also governed by the

Banking Regulations Act, 1949.

Banking Laws (Co-operative Societies) Act, 1955.