Central Government passes ordinance to bring cooperative banks under RBI control

New Delhi: – Government banks, Urban Cooperative Banks and Multi-State Cooperative Banks have been brought under complete control of the Reserve Bank of India (RBI). The Union Cabinet of Ministers has approved an ordinance regarding this. Last year major scams had been reported from cooperative banks. In Maharashtra, funds of thousands of customers were stuck in the Punjab and Maharashtra Cooperative Bank (PMC). To avoid such kind of scams, the decision to bring these banks under the control of RBI has been taken. Prakash Javadekar, Union Minister for Information and Broadcasting, said ‘This decision will reassure the investors of the security of their funds.’

Till date, the cooperative banks were not under complete control of the RBI. Although, the Cooperative Supervisory Team of the RBI was keeping a tab on these banks, the scams were generally exposed later, due to late audits of the smaller cooperative banks. But henceforth, as the RBI will be directly supervising the functioning of these cooperative banks, just like the scheduled banks, they will face periodic audits and the chances of scams will reduce, thereby reducing the chances of losing customers’ funds.

The union government had approved an amendment to banking act, to avoid scams similar to the PMC scam. The Banking Regulation Bill had been brought in the Budget session of the parliament, but it could not be cleared. But now, the government has brought the cooperative banks under more RBI control through an ordinance.

According to this, a total of 1540 cooperative banks which include, 1482 government and urban cooperative banks and 58 multi-state cooperative banks, have come under total control of the RBI. There are 86 a million accounts in these banks and there are deposits of ₹4.84 trillion. Union Minister Javadekar said that these account holders would be reassured, regarding the safety of their money, because of this decision.