The government on Wednesday said all cooperative banks and multi-state cooperative banks will come under the supervision of the Reserve Bank of India, a development aimed at providing comfort to depositors of these banks.
Urban cooperative banks and multi-state cooperative banks will be brought under the RBI supervision process applicable to commercial banks, Information and Broadcasting Minister Prakash Javadekar said while briefing media about the Cabinet decisions.
He said an ordinance in this regard will be promulgated.
Javadekar said that RBIâ€™s powers that apply to scheduled banks will apply to cooperative banks as well.
"The benefit of this is that depositors will be assured their money is safe," he said.
There are about 1,482 crore urban cooperative banks and 58 multi-state co-operative banks with a depositors base of about 8.6 crore with savings of about Rs 4.84 lakh crore, the minister said during the media briefing.
The decision assumes significance amid lakhs of depositors facing problems after a scam in the multi-state Punjab and Maharashtra Cooperative Banks.
Earlier, the Cabinet had approved amendment to Banking Regulation Act to strengthen cooperative banks and avoid PMC Bank like crisis.
Earlier this year, during the Budget, Finance Minister Nirmala Sitharaman has said that cooperative banks would be brought under RBIâ€™s supervision. The Banking Regulation (Amendment) Bill, 2020, which could not be passed in the Budget session of the parliament due to COVID-19.
On September 23, 2019, RBI had put regulatory restriction on the Punjab and Maharashtra Co-operative (PMC) Bank after it came to know of financial irregularities, misreporting of loans and other regulatory issues. However, this restriction left lakhs of depositors unable to access their lifetimeâ€™s savings.
Moneycontrol reported in June that the RBI has put at least 44 co-operative banks across the country under watch in 2020 alone due to reasons such as deteriorating financial health or flouting of norms. As per the report, two banks â€” CKP Co-operative Bank in Maharashtra and the Mapusa Urban Co-operative Bank of Goa â€” were asked to shut shop.