BANK SCAMS .. Govt issues ordinance to bring cooperative banks under RBI watch

NEWS COOP BANKS

NEW DELHI:  In the context of the freewheeling loot of banks in the country by crooked businessmen and others, the Union Government announced on Wednesday that it would bring some 1,540 cooperative banks under RBI supervision. These banks, largely floated or run by local politicians, hold close to Rs 5 lakh crore worth of deposits from crores of account holders.

An ordinance has been issued on this on Wednesday, based on a cabinet decision.

The announcement said all urban cooperatives and multistate cooperative banks are being brought under the RBI supervision which will be done in the same manner as it does with the scheduled banks, offer protection to depositors and limit the scope for fraudulent acts. “There are 1,540 such banks that hold close to Rs 5 lakh crore worth of deposits from over 8 crore lakh account holders. The move to bring them under the RBI will give depositors the assurance that their savings are safe in these banks,” Union  minister Prakash Javadekar said while addressing the media in a virtual press meet.

Among these are 1482 urban cooperative banks and 58 multi-state cooperative banks.

Following the huge Punjab and Maharashtra Cooperative (PMC) Banks scam unearthed a year ago, involving some top Maharashtra politicians too, the Union Government had amended the Banking Regulation Act to strengthen the cooperative banking sector. In the 2020 Budget, finance minister Nirmala Sitharaman had included the government’s plans to bring cooperative banks under RBI supervision.

Large-scale fraudulent activities have been taking place in the banking sector, including in public sector banks (PSBs). As per the announcement, the appointment of CEOs in these cooperative banks will hereafter require prior approval of the RBI.

While what happens in these cooperative banks are often shrouded in mystery due to non-involvement of regulatory mechanisms, politicians and businessmen are bleeding these banks to the maximum, eventually leading to situations of collapse of the banks as in the case of the Punjab and Maharashtra Cooperative Bank.

Public sector banks lost over Rs 10 lakh crore by way of non-performing assets – bad loans – that were taken by businessmen etc without sufficient security and who refused to repay on one pretext or the other, or by making the company loss-making and then closing down. The Modi government has acted against this trend – a vestige left behind by the two terms of the UPA governments led by Dr Manmohan Singh – but not without much results vis-à-vis return of the lost money.  Cases against those like Nirav Modi and Vijay Mallya, who all took allegedly their money abroad and parked in tax havens – are not reaching anywhere as courts come to their defence in view of various provisions in the law that give them protection. Feelings are strengthening that the governmental mechanisms are not capable of stemming such rot, and the Modi government sat playing flute rather than taking strong and effective actions.

Notably, the loot of lakhs of crores by way of unrepaid loans without sufficient security cover took place even as RBI has regulatory control over the PSBs and other scheduled banking mechanisms. So, it remains to be seen whether the RBI regulations on cooperative banks will make any difference to the present scenario of massive loot.  IHN-NN

INDIA HERE AND NOW www.indiahereandnow.com email:indianow999@gmail.com

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