Cooperative Banks Under RBI Supervision

Question

Asked: November 15, 20202020-11-15T08:28:53+05:30 2020-11-15T08:28:53+05:30In: UPSC PRELIMS

Describe cooperative Banks Under RBI Supervision.

Sweety · Accepted Answer · 2020-11-15T08:40:38+05:30

The President promulgated the Banking Regulation (Amendment) Ordinance 2020 to put under the supervision of the RBI, all urban cooperative banks and multi-state cooperative banks.
These banks are currently subject to concurrent regulation by the RBI and the Co-operative Societies Registrar, resulting in regulatory and supervisory lapses. In addition, RBI has no authority so far to draw up an enforceable reconstruction scheme for a cooperative bank.
RBI was authorised to supersede the Board of Cooperative Banks for up to five years by the Ordinance.
It also enables a cooperative bank to issue to its members or to any other individual residing within its area of operation, equity shares, preference shares, or special shares on face value or at a premium. Cooperative banks may also issue to such individuals unsecured debentures or bonds or related securities with a maturity of ten or more years. Such issuance will be subject to prior RBI approval.
The changes should not affect the current powers under the State Co-operative Laws of the State Registrars of Co-operative Societies. The amendments also do not extend to Primary Agricultural Credit Societies (PACS) or cooperative societies for which long-term funding for agricultural production is the primary purpose and principal undertaking.