The President has promulgated the Banking Regulation (Amendment) Ordinance, 2020 on 26 June 2020 to amend the Banking Regulation Act 1949 so as to make its provisions applicable to Co-operative Banks and to extend RBI’s oversight to co-operative banks to protect the interests of depositors and ensure better management.
Section 56 of the Principal Act has been amended to provide a non-obstante clause that Notwithstanding anything contained in any other law for the time being in force, the Act shall apply to co-operative banks/ co-operative societies as they apply to banking companies subject to the specified modifications.
A substituted section 12 enables co-operative banks to raise capital through public issue or private placement.
A new Section 53A grants power to the RBI to exempt cooperative banks in certain cases, for such period of time and on such conditions as may be specified, such as with respect to the prohibition of employment of managing agents and restrictions on certain forms of employment, board of directors to include persons with professional or other experience, provisions relating to the appointment of managing directors being subject to previous approval of the RBI.
Section 45 has been amended to provide that the RBI may even when there is no moratorium, at any other time, prepare a scheme of reconstruction of a banking company in the interest of public and depositors.
The amendments were first made under the Banking Regulation (Amendment) Bill 2020 which was introduced in the Lok Sabha on 3 March 2020 but could not be passed during the budget session of parliament (Refer update below) and hence the need for the Ordinance.
The Ordinance comes into force with immediate effect except for the amendment to section 56 of the Principal Act. Also, different dates of coming into force may be appointed for each of the state, central and primary cooperative banks.
To refer to the gazette notification of the Banking Regulation (Amendment) Ordinance, 2020 dated 26 June 2020, click here.
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