From UPSC perspective, the following things are important :
Prelims level : RRBs, Cooperative Banks
Mains level : RBI regulations of default bankers
To ensure that depositors are protected, the Centre has decided to bring all urban and multi-State cooperative banks under the direct supervision of the Reserve Bank of India (RBI).
Practice question for mains:
Q. What are Cooperative Banks? How are they regulated? Discuss their role in extending credit facilities in rural India.
What are Cooperative Banks?
- A Co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank.
- They are registered under the States Cooperative Societies Act.
- They are also regulated by the Reserve Bank of India (RBI) and governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1955.
What is the present decision?
- The urban cooperatives and multi-State cooperative banks have been brought under RBI supervision process, which is applicable to scheduled banks.
- Currently, these banks come under dual regulation of the RBI and the Registrar of Co-operative Societies.
Why such a move?
- The move to bring these urban and multi-State coop banks under the supervision of the RBI comes after several instances of fraud and serious financial irregularities.
- The most recent was the major scam at the Punjab and Maharashtra Co-operative (PMC) Bank last year.
- The RBI was forced to supersede the PMC Bank’s board and impose strict restrictions.