• 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).
• 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.
Mains Paper 3: Economy
Prelims level: Banking Regulation (Amendment) Bill 2020
Mains level: Highlights about the features of the Banking Regulation (Amendment) Bill