The Reserve Bank of India also wants full authority to regulate co-operative banks like normal banking institutions. In Punjab and Maharashtra Co-operative (PMC) Bank, voices are being raised about the control of co-operative banks after the talk of a huge scam. Discussions are also going on at a high level to curb and better monitor this sector. Taking steps in this direction, the Reserve Bank has now proposed to take control of this sector. The central bank has written a letter to the Finance Ministry asking it to give full control of the cooperative banks.
Finance Ministry is also in favor
From the stand of the Finance Ministry, it seems that it is in favor of this proposal of RBI. It is expected that in the upcoming Budget Session of Parliament, major amendments to the existing Banking Regulation Act are entrusted to the RBI for the complete regulation of the urban cooperative banks. Finance Minister Nirmala Sitharaman had told Parliament last week that RBI is being negotiated to change the monitoring mechanism of urban public banks after the PMC Bank incident. It is now reported that the Reserve Bank of India has made it clear that due to the existing system of double regulation, there are many problems under the supervision of UCBs. The only way to overcome them is that like another banking sector of the country, its reins should be handed over to RBI.
Currently, along with RBI, the control of states
In today's system, along with RBI, states also have control over cooperative banks in urban areas. Due to this, the Reserve Bank is not able to monitor them fully. This dual system is considered to be a major cause of disturbances in cooperative banks. A note sent to the central government by the Reserve Bank of India states that it should be empowered to monitor all the activities of the management of the urban cooperative banks. The central bank has asked for change in management or cancellation of management if needed and appoint its officers in its place and give them other commercial activities in their possession. Right now, when the urban cooperative banks completely fail, RBI intervenes in their management, as in the case of Punjab and Maharashtra Cooperative (PMC) Bank.
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