The past few days were harsh for the government and banks like Yes Bank, ICICI Bank, Punjab and Maharashtra bank, the last few months.
The Cabinet and government have decided to bring these banks under the supervision of India's reserve bank. This was announced in a virtual press meeting by the broadcasting Minister, MR. Prakash Javadekar.
The urban co-operative banks are more than 1482, and multi-state co-operative banks are 58 and have depositors of about 8.6 cores and their money amounting to 4.84 lakh crore, which will remain safe under the Reserve Bank of India supervision.
To protect the interest of the depositors, the union cabinet in February approved the amendment of the banking regulation act to bring all the co-operative banks under the reserves bank of India. This amendment was taken after the crisis of PMC Bank aka Punjab & Maharashtra bank.
This will help to strengthen financial stability, and qualification will be set for appointing a CEO for the co-operative banks.
Permission will be required, like in the case of a commercial bank. As per RBI guidelines, Audits will be done, which will help determine if any bank is under stress and needs help.
This decision was taken in the wake of the scam in the Punjab and Maharashtra co-operative bank, which affected lakhs of people in withdrawing their money due to the restriction imposed by the Reserve Bank of India.
To which the Finance Minister of India Nirmala Sitharaman on Saturday said that this would strengthen the position of the co-operative banks' by increasing professionalism and improving the governance and oversight for sound Banking through The Reserve bank of India.
This decision was made in the budget decided for the year 2020-2021, and as for now, this decision of the Cabinet and government makes a lot of difference in terms of how banks will further function.