Lok Sabha clears Banking Regulation (Amendment) Bill

Vibha Sharma

Tribune News Service

New Delhi, September 16

The Lok Sabha on Wednesday cleared the Banking Regulation (Amendment) Bill, 2020, a regulation that goals to guard the curiosity of depositors by bringing cooperative banks beneath the regulatory framework of Reserve Bank of India (RBI), amid demand by Opposition events that the Bill be withdrawn and despatched to the Select Committee and observations terming it an “infringement or encroachment” upon powers of states and federal construction and the cooperative motion within the nation.

Finance Minister Nirmala Sitharaman, who systematically demolished all objections raised throughout the dialogue on the Bill, nevertheless, remained non-committal to the query as to when the beleaguered depositors of the Punjab and Maharashtra Cooperative Bank, the collapse of which is precursor to the Ordinance throughout the Covid lockdown and now the laws, will obtain their deposits.

NCP’s Supriya Sule had needed to know the “timeline when PMCB depositors will get their money” saying that “only small depositors have got back their money”. “What have you done for resolution to nine lakh affected families…people have died and committed suicide,” Sule mentioned.

The Finance Minister, whereas making it clear that the regulation will solely cowl cooperative societies appearing like banks, mentioned the purpose of the laws is simply to make sure that depositors of cooperative banks, a lot of that are within the pink, don’t undergo. “No one is infringing upon the power of States or federalism. Banking and regulation of banking is definitely under Central list. State cooperative laws are not being touched,” she mentioned.

Adding that nobody can deny the success story of cooperatives, Sitharaman mentioned one additionally wants to remember the truth that in previous twenty years 430 cooperative banks have been de-licenced and gone into liquidation, whereas not a single business financial institution, whose depositors are protected by the depositors regulation, have gone beneath liquidation. “Financial status of 277 urban cooperative banks is weak. As many as 105 cooperative banks are unable to meet the minimum regulatory capital requirement. 47 banks have net worth in negative. 328 urban cooperative banks have more than 15% gross NPA ratio,” she mentioned.

Sitharaman additionally mentioned cooperative banks in India are being regulated by RBI since 1965 not like what some members had claimed. Regarding the explanation for bringing the Ordinance (which is being changed by the laws) she mentioned throughout the Covid lockdown there have been “uncertainties” and “protection of depositors’ interest was important”. “We did not want PMC type incident hurting the depositors,” she mentioned.

In March 2020, the stress in cooperative banks elevated resulting from pandemic and gross ratios of city cooperative banks elevated from 7.7 per cent in March 2019 to over 10 per cent in March 2020. Therefore, it was felt that the ordinance must be introduced within the curiosity of depositors,” she mentioned

On an remark by Congress’ Manish Tewari on the necessity to “descramble” the RBI slightly than overload it, Sitharaman mentioned the preamble of the RBI Act says it has the authority to function and empower credit score system of the nation. Allaying apprehensions, together with that the laws “does not touch agricultural credit societies or cooperative societies whose primary objective is to provide long-term funds for agricultural developments,” she mentioned modifications won’t have an effect on present powers of the state registrars of co-operative societies beneath state legal guidelines. And nor will the modifications apply to main farm credit score societies or cooperative societies, the principle enterprise of which is long-term finance for agricultural growth.

Tewari, who known as it “another attack on federal structure”, maintained that the modifications will “create utter mayhem in the agricultural economy”. 

“For one PMCB, you don’t take way the power of cooperatives,” mentioned AITC MP Saugata Roy. According to AIMIM chief Asaduddin Owasi, it was due to resolution like demonetisation that banks are struggling. He additionally questioned why the federal government “was not showing PMCB depositors the same love they had shown to the depositors of the Bank”. Opposing the Bill, RSP’ NK Premachandram mentioned “it will have far reaching implications on cooperatives”.

The Bill amends the Banking Regulation Act, 1949.  

The Act regulates the functioning of banks and offers particulars on varied features resembling licensing, administration, and operations of banks.  

The Bill goals to deliver co-operative banks beneath the supervision of the RBI

It may also allow the RBI to provoke scheme for reconstruction or amalgamation of a pressured lender with out imposing a moratorium.

It doesn’t apply to a main agricultural credit score society or a co-operative society whose main object and principal enterprise is offering long run finance for agricultural growth if such society doesn’t use as a part of its identify, or in reference to its enterprise, the phrases “bank”, “banker” or “banking” and doesn’t act as drawee of cheques.

In June, the Union Cabinet accredited the Ordinance to deliver 1,482 city and 58 multi-state cooperative banks beneath the supervision of the RBI.

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