Title : THE BANKING REGULATION ACT (AMENDMENT) ACT, 2020

Date : Nov 26, 2021

Description :

GS III

 

Topic à Economy related issues

 

• Context:

 

• Last year, the Lok Sabha enacted the Banking Regulation (Amendment) Bill, 2020.
• The bill repeals an ordinance passed on June 26, 2020 that had the same effect.

 

• The Purpose of the Amendment:

 

• The Banking Regulation Act of 1949 would be amended under the bill.
• The central government intends to put cooperative banks under the Reserve Bank of India's jurisdiction with this new Bill (RBI).

 

• Changes that are significant:

 

• Provisions that apply to banking firms will now apply to cooperative banks as well. This ensures that cooperative banks are subject to the Reserve Bank of India's stronger governance and sound banking standards (RBI).
• RBI will be able to carry out a bank amalgamation scheme without putting it on hold as a result of the revisions.
• It will assist the central bank in developing a strategy to safeguard the public's, banking system's, and account holders' interests in the bank's and banking company's good administration without disturbing any banking functions.
• The modifications also allow cooperative banks to raise funds through public and private equity and preference stock offerings, as well as unsecured debentures, with the approval of the central bank.

 

• The following adjustments, however, will not be made:

 

• Affect the state registrars of cooperative organisations' current authority under state law.
• Apply to Primary Agricultural Credit Societies (PACS) or co-operative societies whose main purpose and activity is to provide long-term financing for agricultural development and do not use the phrases "bank," "banker," or "banking."

 

• What was the need for this:

 

• Following the recent Punjab & Maharashtra Cooperative (PMC) Bank crisis, this was deemed required.
• There are 8.6 lakh account holders in cooperative banks, with a total deposit of roughly 5 lakh crore.
• In addition, over the last five fiscal years, urban cooperative banks have recorded almost 1,000 cases of fraud totaling over Rs 220 crore.

 

• How are cooperative banks governed right now:

 

• The Registrar of Cooperative Societies and the Reserve Bank of India are currently in charge of cooperative banks.
• While the registrar of cooperative societies is in charge of incorporation, registration, management, audit, board supersession, and liquidation, the RBI is in charge of regulatory functions such cash reserve and capital adequacy.

 

• Source à 26/11/21 à Page Number 5

Tags : Reserve Bank of India, Cooperative Societies