Union government decides to bring cooperative banks under RBI's supervision
In a move meant to boost depositors' confidence, the Union government has decided to bring all cooperative banks under the supervision of Reserve Bank of India (RBI), Union Minister Prakash Javadekar announced in a virtual press conference on Wednesday, after a Cabinet meeting. This decision assumes significance in the wake of the Punjab and Maharashtra Cooperative (PMC) Bank crisis. Here are more details.
Last year, faultlines in the PMC Bank surfaced and it was revealed that the bank's top brass lent huge loans to bankrupt Housing Development and Infrastructure Ltd. (HDIL) and its group entities. The loan amounting to Rs. 6,500 crore was four times the bank's regulatory cap and 73% of its total assets. Subsequently, RBI put several curbs on customers, restricting them to withdraw money.
In November, PTI reported that at least seven people have died since the scam surfaced. One person committed suicide. Initially, RBI put a withdrawal limit of Rs. 1,000, and increased it to Rs. 50,000 after outrage. Back then, Finance Minister Nirmala Sitharaman said that although the matter falls outside her prerogative, she will speak to RBI Governor Shaktikanta Das.
Subsequently, during her 2020 budget speech, Sitharaman said regulation of cooperative banks will happen soon. But the restrictions due to COVID-19 pandemic didn't let the Banking Regulation (Amendment) Bill, 2020, to be passed in the Parliament. Today, Javadekar spoke about an ordinance route. There are 1,482 urban cooperative banks and 58 multi-state co-operative banks across India. Their depositors base is nearly 8.6 crore.
"RBI's powers as they apply to scheduled banks will apply for cooperative banks as well. The decision will give an assurance to more than 8.6 crore depositors in these banks that their money amounting to Rs. 4.84 lakh crore is safe," the I&B Minister said.
Further, Javadekar informed a 2% interest subvention to Shishu loan category borrowers of the PM Mudra Yojana was approved by the Union Cabinet. The Cabinet also approved additional investment by ONGC Videsh Ltd. meant for the development of Myanmar's Blocks A-1 and A-3. Meanwhile, the Kushinagar Airport in Uttar Pradesh was recognized as an international airport in the meeting, chaired by PM Narendra Modi.
Javadekar's colleague, Union Minister of Fisheries, Animal Husbandry and Dairy, Giriraj Singh, informed that an Animal Husbandry Infrastructure Development Fund will be set up. Eligible beneficiaries will receive a 3% interest subvention, he added. Separately, MoS for Atomic Energy and Space, Jitendra Singh, said a new institution called Indian National Space, Promotion, and Authorisation Centre will be set up to help private industries in space activities.