In India, there are lot of instances that depositors money was mis-used by the co-operative banks officials.
Due to increase in fraud cases , Modi Government has instructed RBI to keep a watch on Co-operative banks activities. As all co-operative Banks are now online, Modi Government passes a bill on September 16, 2020 to keep “All co-operative Banks are under RBI’s supervision”.
Key Highlights of the Bill amended in Banking Regulations act, 1949–
1.All the co-operative Banks comes under supervision of RBI with immediate effect except co-operative society and primary agriculture credit societies
2.No Member has to be appointed as a chairman; if he is engaged in any crime or insolvent and his remuneration includes any shares or commission in the depositors money
3.The bill allows co-operative banks to issue equity shares, Preferential Shares, Bonds and Debentures of maturity period not exceeding 10 Years.
4.RBI has the right to appoint directors and decide on their duties and responsibilities under section 36AAA.
5.RBI has the power over the chairman and board of director appointments and re-shuffle them as per RBI’s discretion.
RBI’s action on Co-Operative Banks–
RBI Takes diligent steps to safeguard depositors money, RBI has taken action on PMC Bank which falls under ”Insolvency” to repay the amount to their depositors. Likewise RBI Cancelled the licences of Mapusa Urban Cooperative Bank and CKP Co-operative Bank and imposed Partial Restrictions on Kolkata Mahila Cooperative Bank and Guru Raghavendra Sahakara (Co-operative) Bank Niyamitha
Now Co-operative banks are also covered under DICGC Scheme(Deposit Insurance and Credit Guarantee Corporation).
That means , if any co-operative bank becomes insolvent, bankrupted your deposit amount of 5 Lakh Rupees would be given to you as they are insured under DICGC Scheme.