Cabinet approves amendment to bring Cooperative Banks under RBI Regulation

On February 5, 2020, the Union Cabinet approved to bring regulation of cooperative banks under Reserve Bank of India. In order to achieve this, the Cabinet approved amendments to Banking regulation act.

Highlights

According to the amendment, the cooperative banks will now hold the regulatory requirements that have been set for scheduled commercial banks. With the amendment, the cooperative banks have to conduct regulatory commands over cooperative banks. Also, it has to take the approval of RBI in order to appoint its CEO.

The amendment is being made to prevent scenarios such as PMC bank crisis in the future

Background

In September 2019, the RBI imposed sanctions on Punjab and Maharashtra Cooperative Banks (PMC). The withdrawal limit in the banks were set to Rs 1000. Later, it was increased to Rs 50,000 to ease the distress of the customers.

RBI placed the restrictions as the bad loans in the bank accounted to 3.76% of its advances. Also, the profit of the bank had been decreasing. It was 100 crores in 2018 and decreased to 99 crores in 2019. Therefore, RBI took precautionary measures to prevent

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