New code for co-ops to kick in from April

New code for co-ops to kick in from April

Subject : Economics

Context : All Central co-operative banks and States co-operative banks will follow new set of regulations as prescribed under Banking Regulations Amendment Act with effect from April 1, 2021.

Concept :

• The Finance Ministry has issued a notification stating that from April 1, the provisions of Section 4 of the said Act shall come into force for State co-operative banks and Central co-operative banks.
• Section 4 is about amending Section 56 of original act of 1949, which deals with co-operative societies.
• There is amendment which makes it clear that for public issue of private placement of shares, a co-operative bank will need prior approval of RBI.
• This will also be needed for issuance of unsecured debentures or bonds or other like securities with initial or original maturity of not less than ten years, to any member of such co-operative bank or any other person residing within its area of operation.
• The amendments do not affect existing powers of the State Registrars of Co-operative Societies under state co-operative laws.
• The amendments do not apply to Primary Agricultural Credit Societies (PACS) or co-operative societies.
• The Act also amends Section 45 of the Banking Regulation Act, to enable making of a scheme of reconstruction or amalgamation of a banking company for protecting the interest of the public, depositors and the banking system and for securing its proper management, even without making an order of moratorium, so as to avoid disruption of the financial system.