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Lok Sabha passes Banking Regulation (Amendment) Bill
17 Sep '20
2 min read
Pic: Shutterstock
The lower house of Indian parliament (Lok Sabha) on September 16 passed the Banking Regulation (Amendment) Bill, 2020, which proposes amendments to the Banking Regulation Act, 1949. Following reports of deteriorating condition of such banks, the government aims to bring cooperative banks under the supervision of the Reserve Bank of India (RBI) with this step.
"We are trying to bring this amendment to protect the depositors. As in some unfortunate situation in banks, depositors are put to hardship," finance minister Nirmala Sitharaman said in Lok Sabha.
"For the last two years, depositors of cooperative banks and small banks are facing problems. We are trying to bring this amendment in order to protect the depositors. Because these banks have fallen into hard days requiring therefore the regulator to bring a moratorium and to solve the problem seems to consume all the time," she added.
First introduced in March during the Budget Session, the bill could not be passed due to the COVID-19 pandemic. In June, the union cabinet approved the ordinance to bring 1,482 urban and 58 multi-state cooperative banks under RBI supervision.
"Due to the pandemic, the stress in cooperative banks increased and the gross NPA [non-performing assets] ratio increased from 7.27 per cent in March 2019 to over 10 per cent in March 2020. Therefore it was felt that to protect depositors' interest we should have the ordinance brought in," the minister said.
"This bill does not regulate cooperative banks. The amendment is not for central government to take over the cooperative banks," she was quoted as saying by Indian media reports.
With the amendments, RBI will be able undertake a scheme of amalgamation of a bank without placing it under moratorium. Prior to this amendment, if a lender was put under the moratorium, it not only capped the withdrawals by depositors, but also barred a bank’s lending operations.
"We are trying to bring this amendment to protect the depositors. As in some unfortunate situation in banks, depositors are put to hardship," finance minister Nirmala Sitharaman said in Lok Sabha.
"For the last two years, depositors of cooperative banks and small banks are facing problems. We are trying to bring this amendment in order to protect the depositors. Because these banks have fallen into hard days requiring therefore the regulator to bring a moratorium and to solve the problem seems to consume all the time," she added.
First introduced in March during the Budget Session, the bill could not be passed due to the COVID-19 pandemic. In June, the union cabinet approved the ordinance to bring 1,482 urban and 58 multi-state cooperative banks under RBI supervision.
"Due to the pandemic, the stress in cooperative banks increased and the gross NPA [non-performing assets] ratio increased from 7.27 per cent in March 2019 to over 10 per cent in March 2020. Therefore it was felt that to protect depositors' interest we should have the ordinance brought in," the minister said.
"This bill does not regulate cooperative banks. The amendment is not for central government to take over the cooperative banks," she was quoted as saying by Indian media reports.
With the amendments, RBI will be able undertake a scheme of amalgamation of a bank without placing it under moratorium. Prior to this amendment, if a lender was put under the moratorium, it not only capped the withdrawals by depositors, but also barred a bank’s lending operations.
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