Money & Banking

‘Bringing co-op banks under RBI’s ambit will ensure greater accountability’

Our Bureau New Delhi | Updated on February 05, 2020 Published on February 05, 2020

The Cabinet, on Wednesday, gave its nod to amend the Banking Regulation Act so as to put certain co-operative banks, including multi-state co-operative banks, under the regulatory ambit of the RBI. “The proposed amendments will ensure greater accountability and transparency in the functioning of co-operative banks,” Information and Broadcasting Minister, Prakash Javadkar, told reporters after the Cabinet meeting.

Under the proposed changes, co-operative banks will need to take the RBI approval for the appointment of Chief Executive Officer (CEO). Besides, such co-operative banks will also come under the RBI’s supervision in terms of audit. The central bank will also have power to supersede the board of multi-state co-operative banks. Currently, there are 1,540 co-operative banks with 8.6 crore depositors anddeposits worth ₹5-lakh crore, according to Javadekar.

On the anvil are specific capital adequacy norms for such banks besides management norms, including qualifications for directors, MDs, and no conflict of interest in their appointments. The proposed norms will also cover loan size, single party and group exposure for lending by these banks. It may be recalled that Finance Minister Nirmala Sitharaman had, in her Budget speech, announced that the government intends to bring amendments to the Banking Regulation Act to strengthen co-operative banks in the country.

The move to bring the banking activities of multi-state co-operative banks under the RBI’s supervisory framework comes in the wake of recent failures of co-operative banks, including PMC Bank, last year.

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Published on February 05, 2020
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