Amendment To The Banking Regulation Act, 1949

Table of Contents

Commercial bank Vs Cooperative bank

Interest rate on deposits in Cooperative banks are slightly higher
Cooperative bank is governed by both banking and cooperative legislation, as they are registered under the Cooperative Society Act, 1965
And regulated by National Bank for Agriculture and Rural Development (NABARD) & Reserve Bank of India (RBI).
Banking laws were made applicable to cooperative societies in 1966 through an amendment to the Banking Regulation Act, 1949.
Since then, banking related functions are regulated by the RBI
And management related functions are regulated by respective State Governments.
The amendments made to the Act will apply to-
Urban co-operative banks & Multi-state co-operative banks

The Ordinance seeks to protect the interests of depositors and strengthen cooperative banks,
By improving governance and oversight by extending powers already available with the RBI in respect of other banks
The recruitment for the banks’ management will be based on certain qualifications.
Appointment of the chief executive officer (CEO) will require prior permission from the banking regulator, as in case of other commercial banks.
The audit of such banks will be as per the RBI guidelines.
Also central bank can supersede the board, in consultation with the state government, if any co-operative bank is under stress.
The Banking Regulation Act (amendment) Ordinance also enables cooperative banks,
To raise money via public issue and private placement, of equity or preference shares and unsecured debentures,
Subject to the central’s bank’s approval.

The Banking Regulation (Amendment) Ordinance, promulgated by the President on Friday,
Empowers the Reserve Bank of India to undertake revival plans for banks without imposing a moratorium to avoid disruption of the financial system.
In case of Yes Bank, for instance, the government and the RBI first decided to put a moratorium which capped the amount of withdrawal by depositors.
It was only after a few days that a new set of shareholders, led by SBI were put in the saddle.
Over the years RBI has followed this practice.

The ordinance amends Section 45 of the Banking Regulation
To enable making of a scheme of reconstruction or amalgamation of a banking company,
For protecting the interest of the public, depositors and the banking system and for securing its proper management,
Even without making an order of moratorium, so as to avoid disruption of the financial system.