Relief For Depositors! Govt Decides To Bring All Cooperative Banks Under RBI Supervision

With immediate effect from the date of President’s nod on the ordinance, the co-operative banks in the country will come under the supervision of Central bank.

Co-operative banks in the country will come under the supervision of RBI. (File Photo/ Getty)

New Delhi: In what might be considered as a sight of relief for depositors, the Centre on Wednesday decided to bring all Urban co-operative banks (UCBs) and Multi-State co-operative Banks under the governance of the Reserve Bank of India (RBI). The move is aimed at providing comfort to depositors of these banks. Urban cooperative banks and multi-state cooperative banks will be brought under the RBI supervision process applicable to commercial banks, Information and Broadcasting Minister Prakash Javadekar said while briefing media about the Cabinet decisions. The reports also suggest that with immediate effect from the date of President’s nod on the ordinance, the co-operative banks in the country will come under the supervision of Central bank. "Government banks, including 1,482 urban cooperative banks and 58 multi-state cooperative banks, are now being brought under supervisory powers of Reserve Bank of India (RBI)," Javadekar said earlier in the day.

#Cabinet approves an ordinance to bring 1,482 urban and 58 multi state cooperative banks under the supervision power of @RBI. It will give an assurance to 8.6 crore depositors in these banks that their money will stay safe: Union Minister @PrakashJavdekar #cabinetdecisions pic.twitter.com/1voDml0Iiz

— PIB India (@PIB_India) June 24, 2020

The announcement comes months after Finance Minister Nirmala Sitharaman, during her Budget 2020 speech in February, shared government's intention to bring co-operative banks under the ambit of RBI. The Central government brought in an ordinance as a bill could not be passed in the Budget session of Parliament. As per data, there are close to 9 crore depositors spread across 1,500 urban and multi-state co-operative banks in the country. Javadekar while announcing the decision also assured that depositors' money amounting to Rs 4.84 lakh crore in these banks will stay safe. The decision assumes significance amid lakhs of depositors facing problems after a scam in the multi-state Punjab and Maharashtra Cooperative Banks. Earlier, the Cabinet had approved amendment to Banking Regulation Act to strengthen cooperative banks and avoid PMC Bank like crisis. Meanwhile, the government also decided to provide 2 per cent interest subvention to borrowers under the 'Shishu' category of the flagship Pradhan Mantri MUDRA Yojana (PMMY). Under this, collateral free loans up to Rs 50,000 will be given to beneficiaries.

#CabinetDecisions: 2% Interest Subvention approved on prompt repayment of Shishu Loans under Pradhan Mantri #MUDRA Yojana for a period of 12 months Scheme will help small businesses brace the disruption caused due to #COVID19https://t.co/0lsvtvkNkM

— PIB India (@PIB_India) June 24, 2020

In the wake of coronavirus outbreak, the central government decided to extend the tenure of the OBC Commission by six months, Union minister Prakash Javadekar said. The government also announced Rs 15,000 crore infrastructure fund to provide interest subvention of up to 3 per cent to private players for setting up of dairy, poultry and meat processing units.