Cooperative banks under RBI Supervision: The Union Cabinet on Wednesday approved an ordinance to bring Urban Cooperative Banks (UCBs) and multi-state cooperative banks (MSCBs) under RBI supervision.

“Government banks, including 1,482 urban cooperative banks and 58 multi-state cooperative banks, are now being brought under supervisory powers of Reserve Bank of India; RBI’s powers as they apply to scheduled banks will apply for cooperative banks as well,” Javadekar told reporters through video conferencing.

Assurance of safety to depositors

He(Prakash Javedkar) said to bring those 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. The Union Cabinet has approved an ordinance in this regard and with immediate effect from the date of President’s nod on the ordinance, the co-operative banks in the country will come under the RBI’s supervision.

Finance Minister Nirmala Sitharaman had announced the government’s intention to bring co-operative banks under the RBI’s supervision in Budget 2020. The government brought in an ordinance as a bill could not be passed in the Budget session of Parliament.

Currently, cooperative banks are governed by dual control of cooperative societies as well as the RBI. While the role of cooperative society includes incorporation, registration, management, recovery, audit, supersession of board of directors and liquidation, RBI is responsible for regulatory functions.

Cooperative institutions play a crucial role in financial inclusion and cater to both rural and urban areas. The recent crisis surrounding Punjab and Maharashtra Co-operative Bank Ltd and other such lenders exposed the vulnerability of cooperative banks after the central superseded the lenders’ board after uncovering several irregularities. Giving greater power to the RBI will prevent malpractices and ensure better regulation.

These banks will come under the supervision of the RBI with immediate effect from the date of the President’s approval on the ordinance.

The cabinet also approved 2% interest rate subvention for a period of 12 months to prompt loan payees under the Mudra scheme’s Shishu category. The relief was announced as a part of the Aatma Nirbhar Bharat package last month and is expected to bring relief to small borrowers under the Mudra Shishu loans up to ₹50,000.

The PMMY was launched by Prime Minister Narendra Modi on April 8, 2015, for providing loans up to 10 lakh to non-corporate, non-farm small/micro-enterprises.

These loans are classified as MUDRA loans under PMMY. These loans are given by commercial banks, RRBs, small finance banks, MFIs, and NBFCs.

The I&B minister also said that the Union Cabinet has approved the declaration of Kushinagar Airport in Uttar Pradesh as an international airport.