New banking bill gives RBI powers to restructure co-operative banks

Reserve Bank of India

The new Banking Regulation (Amendment) Bill, 2020, introduced by the government on the first day of the Parliament's Monsoon Session, provides the Reserve Bank of India (RBI) powers to restructure cooperative banks.

The Bill was introduced by Finance Minister Nirmala Sitharaman who earlier withdrew the bill introduced in March before Covid-19 disruptions set in.

"Now what we are bringing, after withdrawing that Bill which came in the form of ordinance, is essentially what the Bill of March 2020 had, together with a few things added in such as giving the Reserve Bank a chance to be able to restructure any distressed cooperative banks just in case they are in severe distress," she said while replying to member's question on the bill's withdrawal and then its re-introduction.

The government had introduced a Banking Regulation (Amendment) Bill on March 3 and subsequently an ordinance was promulgated because it was not passed. The government's rationale for the Ordinance was that there was stress in several cooperative banks that may have got enhanced during the period of lockdown.

"As a result of it, it was felt that till we clear the Bill, there should not be a situation where many of the cooperative banks would suffer and, therefore we brought in an ordinance with essential features of the Bill which was tabled in the House in March," Sitharaman said.



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