Cooperative banks will be brought under RBI supervision

Following the cabinet decision, 1,482 urban cooperative banks and 58 multi-state cooperative banks will come under the central bank’s oversight, which would mean tighter supervision, reports The Economic Times.
 
RBI’s powers on scheduled banks would be hence applicable on cooperative banks as well. “The decision to bring 1,540 cooperative banks under RBI's supervision will give an assurance to more than 8.6 crore depositors in these banks that their money amounting to Rs 4.84 lakh crore will stay safe,” Union minister Prakash Javadekar said. The banks will come under RBI supervision with immediate effect from date of President’s approval on the ordinance. 
 
The ordinance will give RBI the same powers of supervision over cooperative banks as it does over scheduled cooperative banks and also a say in key appointments. This means that RBI will now be fully responsible if cooperative banks continue to fail with the same chilling regularity as they have, under shared regulation with the registrar of cooperatives, in the past few decades.
 
Cooperative banks had for a long been a weak link in the financial system because of lack of adequate oversight. While RBI has been regulating and supervising banking functions, primary oversight has been with the registrar of societies. 
 
The Union cabinet had in February this year approved amendment to the Banking Regulation Act to bring cooperative banks under the RBI. The ordinance will implement provisions immediately while law is amended in Parliament. The proposal had been announced in the budget this year.

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