On 27th June, 2020, 14th President of India, Mr. Ram Nath Kovind promulgated the Banking Regulation (Amendment) Ordinance, 2020. This Ordinance was promulgated since the Parliament is not in session currently.
The ordinance came into force so as to provide protection and strength to depositors as well as cooperative banks. It seeks to do this by governing and supervising through an extension of powers rested in the RBI. This will hence result in sound regulation of the banking system, by enabling their access to capital as well as ensuring the process to be completely professional. The amendments do not affect existing powers of the State Registrars of Co-operative Societies under state co-operative laws and they do not apply to Primary Agricultural Credit Societies (PACS) or co-operative societies whose primary motive and principal business is long-term finance for agricultural development.
To protect the interest of the public, depositors and the banking system and for securing its proper management without disrupting the financial system, the Ordinance also amends Section 45 of the Banking Regulation Act, to enable making of a scheme of reconstruction or merger of a banking company.
If this ordinance is passed as an act when the Parliament finaaly is in session then Reserve Bank of India (RBI) will successfully be supervising over 1400 urban cooperative banks and 58 multi-state cooperative banks having about 9 crore depositors with total savings deposit of about Rs 5 lakh crore. The ordinance is said to have been instigated by scams in cooperative banks, including the Punjab and Maharashtra Cooperative (PMC) Bank. Such scams affect lakhs or even crores (in some cases) of customers who then face difficulty in withdrawing their money from their bank accounts due to restrictions which the Reserve Bank of India (RBI) then imposes upon the bank. The Reserve Bank of India (RBI) recently had placed regulatory curbs on PMC Bank on September 23, 2019, after finding out certain financial irregularities and misreporting of loans given to real estate developer HDIL. Earlier this month, the Reserve Bank of India (RBI) had put limitations on withdrawals from People's Co-operative Bank, Kanpur, Uttar Pradesh. Such restrictions will reduce the number of frauds that occur in the banking sector as everything will be directly supervised, scrutinized and approved or censored by Reserve Bank of India (RBI). In my personal opinion, it is one of the best moves by the Government of India to reduce multi-crore frauds which disrupt the economy of the entire nation and therefore in longer run have a much more stabilized economy.
Source: Ministry of Finance of India
