New Delhi: The Centre has decided to bring urban and multi-state cooperative banks under the direct supervision of the Reserve Bank of India to protect depositors in these financial institutions.
The Union Cabinet, in a meeting held on Wednesday, decided to initiate the move via the Ordinance route.
The move will bring 1,482 urban and 58 multi-state cooperative banks under the supervisory powers of the RBI.
In terms of regulatory power, the central bank had limited control over these institutions, thereby, increasing the risk on the depositors.
At present, there are various types of cooperative banks which come under different central and state regulations.
The development assumes significance after last year's PMC scam.
According to Union Information and Broadcasting Minister Prakash Javadekar, the move will give an assurance to 8.6 crore depositors in these banks that their money will stay safe.
In February, the Banking Regulation Act was amended to give RBI more regulatory powers over cooperative banks.
However, these amendments failed to be passed through the Budget session due to Covid-19 outbreak.
Currently, the RBI can not audit these banks or give its consent for the appointment of the bank's CEO, without these new powers.