Cooperative banks brought under RBI supervision through ordinance

The Centre has decided to bring all urban and multi-State cooperative banks under the supervisions of the RBI to protect depositors. The Union Cabinet approved an ordinance to this effect.

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Key-Points

RBI’s powers on scheduled banks would be hence applicable on cooperative banks as well.

The urban cooperatives and multi-State cooperative banks are 1,540 in number and have a depositor base of 8.6 crore who have saved ₹4.84 lakh crore

Currently, these banks come under dual regulation of the RBI and the Registrar of Co-operative Societies.

The move to bring these urban and multi-State coop. banks under the supervision of the RBI comes after several instances of fraud and serious financial irregularities, including the major scam at the Punjab and Maharashtra Co-operative (PMC) Bank last year. In September, the RBI was forced to supersede the PMC Bank’s board and impose strict restrictions.

Cooperative Banking

A Co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank.

Co-operative banks in India are registered under the States Cooperative Societies Act.

These banks are owned and controlled by the members, who democratically elect a board of directors.

Primary Cooperative Banks, popularly known as Urban Cooperative Banks (UCBs) are regulated and supervised by the Registrar of Cooperative Societies (RCS) of State concerned.

The banking related functions are regulated and supervised by the Reserve Bank under the provisions of the Banking Regulation Act, 1949.