Coop banks to come under RBI watch
NEW DELHI: The Union cabinet on Wednesday approved an ordinance to bring 1,482 urban and 58 multi-state cooperative banks under the supervision of the Reserve Bank of India, a move that will strengthen oversight of the lenders and prevent a Punjab and Maharashtra Cooperative (PMC) Bank-like fraud.
“Depositors will get protection and benefit out of it. It will give an assurance to 8.6 crore depositors in these banks that their money will stay safe,” information and broadcasting minister Prakash Javadekar told reporters on Wednesday.
Cooperative banks are currently under the dual control of cooperative societies as well as RBI. While the role of the cooperative society includes incorporation, registration, management, audit, supersession of board of directors and liquidation, RBI is responsible for regulatory functions. The government’s move follows the collapse of PMC Bank, which had allegedly created fictitious accounts to hide over ₹4,355 crore of loans extended to the now bankrupt Housing Development and Infrastructure Ltd (HDIL). The fraud was discovered by the Reserve Bank of India in September last year.
The new regulatory structure is expected to prevent such malpractices and strengthen cooperative banks, which play a crucial role in financial inclusion and cater to both rural and urban areas. The government did not release details of the amendments. The cooperative banks will come under the supervision of RBI as soon as President Ram Nath Kovind approves the ordinance.
The move will benefit and protect depositors, says Union minister Prakash Javadekar.