Comforting depositors at the cooperative banks, the Cabinet promulgated an Ordinance on Wednesday to bring nearly 1,500 urban cooperative banks and multi-state cooperative banks under direct supervision of the Reserve Bank of India (RBI).
This is indeed a very welcome move since by doing so, the Centre has been able to send out an assurance to 8.6 crore investors – who were visibly rattled with the turn of events at the PMC bank – that their hard earned money is safe. The RBI had in January this year said that urban cooperative banks had been hit by at least 1,000 frauds worth over Rs 220 crore in past five fiscals.
Through this Ordinance, Centre has brought 1,5000 cooperative banks with nearly Rs 5 lakh crore assets under RBI’s monitoring. This move will go a long way in increasing their accountability and strengthening their compliance with the regulatory framework thereby lessening the scope for mismanagement and fraud.
As per new norms, appointment of CEOs in these cooperative banks will now require prior approval from RBI.
The government moves follows several instances of fraud and cheating in banks through fudging of books, mismanagement of loans which lead to threatening deposits and shaking up stability of the country’s financial system.