The Banking Regulation (Amendment) Bill, 2020: Highlights

The Banking Regulation (Amendment) Bill, 2020 was introduced by the Minister of Finance, Ms. Nirmala Sitharaman on March 3, 2020 to introduce new changes in the cooperative banks in India. The Bill is aimed at improving at the governance in the cooperative banks and deals with matters like licensing, operations etc. A cooperative bank in India is bank registered under the State Cooperative Societies Act. These members of cooperative banks act as their owners as well as customers and are generally established to help the economically backward or rural population in India.

The Bill is not applicable to primary agricultural credit societies, and cooperative societies that majorly deal with the financing of agricultural activities. The Bill states that these societies are prohibited from include the words like bank, banker or banking in their names. The cooperatives banks have been allowed to issue shares to the individuals or entities located within their area of operation.

The Bill focuses on applying the RBI(Reserve Bank of India) guidelines on the cooperative banks by considering them at par with the commercial banks in India.It states that the chief executive shall be appointed with the permission of the banking regulator and the RBI (Reserve Bank of India) has been given the authority to supersede the Board of Directors of cooperative bank registered with the Registrar of Cooperative Societies of state if it is required after consulting with the state government. The Bill also states that the RBI may supersede the board of directors of a multi-state cooperative bank when it is in the public interest for RBI to supersede the Board, and to protect depositors.  Further, the RBI can exempt any cooperative bank from the application of certain provisions of the Act. Thus, the Bill seeks to strengthen the professionalism and governance in the cooperative banks in India.