President promulgated the Ordinance reviving RBI without Moratorium

The President promulgated the Ordinance of the Banking Regulation Amendment. The signing was officially complete on Friday. Since, it empowers the Reserve Bank of India to undertake revival plans for banks. Without imposing a moratorium to avoid disruption of the financial system. Therefore, it directly pertains to the President as his duty enables Indian Banking Sectors to make changes with time.

However, in the case of Yes Bank for instance. The Government and the RBI decided to establish a moratorium. Which capped the amount of withdrawal by depositors. Also, it was only after a few days that a new set of shareholders. Which were led by SBI were put in the matter at hand. Hence, RBI has followed this practice that developed over the years.

The ordinance amends Section 45 of the Banking Regulation Act. In order to enable the making of a scheme or reconstruction or amalgamation of a banking company. Because it will protect the interest of the public, depositors and the banking system. And for securing its proper management, even without making an order of moratorium. Therefore, to prevent disturbance of the financial system.

The Ordinance Amendment Act For Banking 

However, in pursuance of the commitment to ensure the safety of depositors across banks. The President has promulgated the Banking Regulation (Amendment) Ordinance, 2020. The ordinance amends the Banking Regulation Act, 1949. Which is as applicable to Cooperative Banks. According to a detailed Government statement.

Furthermore, It stated. Firstly, the ordinance seeks to protect the interests of depositors. Secondly, strengthen cooperative banks by improving governance. As well as oversight by extending powers already available with RBI. Which are in respect of other banks to cooperative banks as well. For sound banking regulation and by ensuring professionalism. Conclusively, enabling their access to liquid capital.

But, the amendments will not affect existing powers of the state registrars of cooperative societies. These existing powers are protected under state cooperative laws. However, the amendments also do not apply to primary agricultural credit societies (PACS). And cooperative societies whose primary object and principal business is long-term finance for agricultural development. And those, which do not use the word “bank” or “banker” or “banking”. As well as those who do not act as “drawees” of “cheques”.

This week the cabinet had approved the promulgation of an ordinance. In order to bring all urban cooperative banks and multi-state cooperative banks. Under the supervision of the RBI to provide comfort to depositors and prevent incidents. Such as the one involving the Punjab and Maharashtra Cooperative Bank. Since thereafter last year, the RBI had imposed curbs on withdrawals. It also appointed an administrator and superseded the board of directors of the bank after major financial irregularities.


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