The Centre on Wednesday approved a decision to bring 1,540 cooperative banks with close to Rs 5 lakh crore worth of deposits from 8 crore lakh account holders, under the purview of Reserve Bank of India (RBI). The banks will now be under the supervision of the RBI as other scheduled banks. This is likely to bring down the mismanagement that is often reported from such banks.
Earlier this year, finance minister Nirmala Sitharaman had announced the government’s intention to bring the cooperative banks under RBI’s supervision and said that it will be done through an amendment to the Banking Regulation Act. The government on Wednesday issued an ordinance in this respect.
With this, the cooperative banks will now need to get prior approval from the RBI to appoint its CEOs among other things. The move is aimed at bringing more accountability from these banks which are often mired in corruption.
India has over the years reported many instances of co-operative banks going kaput because of fraud, cheating and mismanagement of loans resulting in depositor’s losing their hard earned money.