On June 26, President in his promulgation of Banking Regulation Amendment empowered RBI to take on the responsibility of forging revival plans for banks without the prior requirement of imposing a moratorium. The change will help to avoid the disruption of the financial system. Section 45 of the Banking Regulation Act has been amended to initiative the changes.
A statement by the government said, “The ordinance amends Section 45 of the Banking Regulation Act to enable the making of a scheme of reconstruction or amalgamation of a banking company for protecting the interest of the public, depositors and the banking system and for securing its proper management, even without making an order of moratorium, so as to avoid disruption of the financial system. In pursuance of the commitment to ensure the safety of depositors across banks, the President has promulgated the Banking Regulation (Amendment) Ordinance, 2020. The ordinance amends the Banking Regulation Act, 1949 as applicable to Cooperative Banks”.
It added, “Ordinance seeks to protect the interests of depositors and strengthen cooperative banks by improving governance and oversight by extending powers already available with RBI in respect of other banks to cooperative banks as well for sound banking regulation, and by ensuring professionalism and enabling their access to capital”.
The government has made a provision to bring all urban cooperative banks and multi-state cooperative banks under the supervision of the RBI. The amendment, however, will not exclude the existing powers of the state registrars of cooperative societies under state cooperative laws and will not be applicable to primary agricultural credit societies (PACS) or cooperative societies that primarily provides long-term finance for agricultural development, do not use the word “bank” or “banker” or “banking” and do not act as drawees of cheques.