Finance minister introduces Banking Regulation (Amendment) Bill in Lok Sabha

• Finance minister Nirmala Sitharaman on Monday introduced Banking Regulation (Amendment) Bill, 2020 in the Lok Sabha. The law seeks to protect the interest of the depositors by bringing co-operative banks under the regulatory framework of Reserve Bank of India (RBI).

About:

• The bill seeks to replace Banking Regulation (Amendment) Ordinance 2020 that amended Banking Regulation Act, 1949 Act.

• Ordinance brought 1,482 urban and 58 multi-state cooperative banks under RBI supervision to:

• Strengthen oversight of the lenders;

• Boost depositors’ confidence;

• Prevent a Punjab and Maharashtra Cooperative (PMC) Bank-like fraud;

• Protect deposit holders for any fallout of the impact of the pandemic.

Key features of the bill:

• It will bring Urban Cooperative Banks and multi-state cooperative banks under direct supervision of RBI.

• Urban and multi-state cooperative banks come under dual regulation of RBI and the Registrar of Co-operative Societies (RCS).

• Allows RBI to resolve banking stress without putting Banks under a moratorium.

• Earlier, RBI had to first place a bank under a moratorium before preparing a revival scheme for stressed bank. During moratorium, bank cannot grant any loans or make investments in any credit instruments.

• Co-operative banks are financial entities established on a co-operative basis and belonging to their members. This means that the customers of a co-operative bank are also its owners.

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Mains Paper 3: Economy

Prelims level: Banking Regulation (Amendment) Bill 2020

Mains level: Highlights about the features of the Banking Regulation (Amendment) Bill

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