With the amendments, RBI will be able undertake a scheme of amalgamation of a bank without placing it under moratorium
NEW DELHI: Finance minister Nirmala Sitharaman on Monday introduced Banking Regulation (Amendment) Bill, 2020 in the Lok Sabha. The law seeks to protect the interest of the depositors by bringing co-operative banks under the regulatory framework of Reserve Bank of India (RBI).
With the amendments, RBI will be able undertake a scheme of amalgamation of a bank without placing it under moratorium. Earlier, if a bank was placed under moratorium, it not only limited withdrawals by depositors, but also disrupted a bank’s lending operations.
“Further amendments were proposed to be made in section 45 of the Act to enable the Reserve Bank of India to make a scheme to protect the interests of the public, the banking system, depositors or to secure the banking company’s proper management, without first making an order of moratorium so as to avoid disruptions in the financial system,” according to the statement of objects and reasons mentioned in the bill introduced in the Lok Sabha.
According to the bill, the central bank’s banking regulations will be applicable to cooperative banks as well, which is expected to enhance the oversight of the co-operative banking sector which has seen many scandals in the past. Cooperative banks have been under the dual control of cooperative societies as well as RBI.