Ministry of Finance

President Promulgates Banking Regulation (Amendment) Ordinance, 2020
Amendments to ensure
better management & sound regulation of Cooperative
banks
Facilitates making of reconstruction/amalgamation Scheme in the interest of public/depositors/banking/proper banking company management

Banking Regulation Act 1949 amended
Banking Regulation Act 1949 amended

Cooperative bank of India is governed by banking and cooperative legislation, as they are registered under the Cooperative Society Act, 1965
And regulated by National Bank for Agriculture and Rural Development (NABARD) & Reserve Bank of India (RBI).

Banking sector laws were made applicable to cooperative societies in 1966 through an amendment to the Banking Regulation Act, 1949.

‘Since then, banking functions are regulated by the Reserve Bank of India
And management functions are regulated by respective State Governments. The amendments made to the Act will apply to Urban co-operative bank Multi state co-operative banks

MAIN AIM OF THE BILL

The Bill Ordinance seeks to protect the interests of depositors and strengthen cooperative banks of India,

By improving governance and oversight by extending powers already available with the Reserve Bank of India in respect of other banks
• The recruitment for the banks’ management will be based on qualifications.
• It will require prior permission from the banking regulator, as in case of other commercial banks to Appoint of the chief executive officer.
The audit of banks of india will be as per the Reserve Bank of India guidelines.

Also central bank of india can supersede the board, in consultation with the state government, if any co-operative bank is under stress.
The Banking Regulation Act (amendment) Ordinance also enables cooperative banks,
To raise money via public and private placement, of equity or preference shares and unsecured debentures,
Subject to the central’s bank’s approval.

Banking Regulation Act 1949 amended

The Banking Regulation (Amendment) Ordinance, promulgated by the President on Friday,
Empowers the RBI to undertake revival plans for banks without imposing a moratorium to avoid disruption of the financial system in india.

In case of Yes Bank, for instance, the government and the RBI first decided to put a moratorium which capped the amount of withdrawal by depositors.
It was only after a few days that a new set of shareholders, led by SBI were put in the saddle.
Over the years RBI has followed this practice.

WHAT THE ORDINANCE DOES?

The ordinance amends Section 45 of the Banking Regulation
To enable making of a scheme of reconstruction of a banking sector,
For protecting the interest of the public, depositors and the banking system and for securing its proper management Team,
Even without making an order of moratorium, so as to avoid.

Banking Regulation Act 1949 amended Banking Regulation Act 1949 amended