New Delhi, Mar 24 (KNN) Highlighting measures taken to strengthen co-operative banks in the country, Minister of State (MoS) for Finance Pankaj Chaudhary has said that amendments to the banking laws have enhanced oversight, transparency and accountability.
Among the steps taken by the government, the Minister said, are amendments in the Banking Regulation Act and Multi–State Cooperative Societies (MSCS) Act, 2002.
“The regulatory and supervisory framework of Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) ensures that cooperative banks function with financial transparency,” Chaudhary stated in written reply to a question in Lok Sabha.
The Minister said that in order to ensure transparency and protect depositors’ interests, the Banking Regulation Act has been amended to make the term of Board of Directors of Cooperative Banks (excluding Chairperson and Whole-time directors) as maximum 10 consecutive years.
Further, the Multi–State Cooperative Societies (MSCS) Act, 2002 has been amended to include the provision of appointment of Cooperative Ombudsman.
As per the reply, Master Direction on Fraud Management for the Cooperative Banks was issued in 2024 by RBI and contain comprehensive guidelines related to reporting of fraud, following of principles of natural justice, governance mechanism, implementation of early warning mechanism, staff accountability, fixation of responsibility of third parties and role of external and internal auditors, among others.
The MoS Finance noted that RBI’s Prompt Corrective Action (PCA) Framework requires the identified cooperative banks to initiate and implement remedial measures in a timely manner to restore their financial health and protect the interests of the depositors.
NABARD has implemented the Turn Around Plan (TAP) to improve the financial performance and prevent/reduce losses in State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs).
TAP aims to reduce financial losses and improve the overall health of these cooperative banks by adopting a comprehensive approach which includes review and monitoring of financial parameters, business diversification, internal checks and controls and cost rationalization among others.
Notably, the RBI has implemented a financial safety net for the account holders of banks (including cooperative banks) in the form of deposit insurance of up to Rs 5 lakh per depositor. It has also issued guidelines for the Risk Based Internal Audit (RBIA) system in Urban Cooperative Banks.
(KNN Bureau)
