A Joint Parliamentary Committee has turned down a ‘request’ by the Reserve Bank of India to include overarching proviso in the Multi-State Co-operative Societies (Amendment) Bill.

The committee, under the chairmanship of Lok Sabha MP, Chandra Prakash Joshi, tabled its report in the Parliament on Wednesday. Now the reworked bill be taken up by both the Houses. The bill aims to amend the Multi-State Co-operative Societies (MSCS) Act, 2002 to accommodate changes brought on by the 97th Constitutional Amendment Act and also to accommodate changes in the co-operative sector over the period.

Proposed changes

During a meeting of the Joint Committee, the RBI submitted that the proposed amendments to the MSCS Act will have bearing on some provisions of the Banking Regulation (BR) Act. Further, though BR Act is a special law, the possibility of having different interpretations cannot be ruled out. The committee noted that as per the RBI, it might not be possible to foresee all possible conflicts that could arise in future. Hence, the RBI requested that an overarching proviso be inserted after clause (b) of Section 2 in the proposed bill.

The proviso read, ”Provided that in case of a co-operative bank, the application of provisions of this Act shall be subject to the provisions of the Banking Regulation Act, 1949 and the Rules, Regulations, Directions or Instructions issued there under by the Reserve Bank from time to time.”  

The Co-operatives Ministry, on its part, underlined that earlier the financial services department had said that the bill is largely aligned with BR Act and thus it agrees and supports the amendment Bill. Further, suitable amendments will be made by the financial services department in the BR Act so that its provisions are in consonance with the Constitution.

Dual regulation

The Committee observed that as per the prevailing practice, banking license by the RBI is given to entities incorporated under different laws such as Indian Companies Act or various Cooperative Societies Acts. All such entities are governed by the respective acts under which they are incorporated as well as under BR Act. As such, dual regulation exists for all such entities.

“To bring clarity, the amendment Bill proposes in Section 120 B (new insertion) that the provisions of MSCS Act 2002 are applicable to a multi-State co-operative bank in respect of matters relating to incorporation, regulation and winding up, provided that in case of a multi-State cooperative society carrying on the business of banking, the provisions of the Banking Regulation Act, 1949, shall also apply,” it said while deciding that there was no need to insert an overarching proviso.

Meanwhile, the Committee accepted two suggestions — one talks about inserting ‘e-mail address’ as part of provision related with address. Second change is in definition where financial year will be substituted for co-operative year.