Amendment To The Banking Regulation Act, 1949 – Free PDF Download



Commercial bank Vs Cooperative bank

  • Interest rate on deposits in Cooperative banks are slightly higher
  • Cooperative bank is governed by both banking and cooperative legislation, as they are registered under the Cooperative Society Act, 1965
  • And regulated by National Bank for Agriculture and Rural Development (NABARD) & Reserve Bank of India (RBI).
  • Banking laws were made applicable to cooperative societies in 1966 through an amendment to the Banking Regulation Act, 1949.
  • Since then, banking related functions are regulated by the RBI
  • And management related functions are regulated by respective State Governments.
  • The amendments made to the Act will apply to-
  • Urban co-operative banks & Multi-state co-operative banks

Main aim of the bill

  • The Ordinance seeks to protect the interests of depositors and strengthen cooperative banks,
  • By improving governance and oversight by extending powers already available with the RBI in respect of other banks
  • The recruitment for the banks’ management will be based on certain qualifications.
  • Appointment of the chief executive officer (CEO) will require prior permission from the banking regulator, as in case of other commercial banks.
  • The audit of such banks will be as per the RBI guidelines.
  • Also central bank can supersede the board, in consultation with the state government, if any co-operative bank is under stress.
  • The Banking Regulation Act (amendment) Ordinance also enables cooperative banks,
  • To raise money via public issue and private placement, of equity or preference shares and unsecured debentures,
  • Subject to the central’s bank’s approval.

  • The Banking Regulation (Amendment) Ordinance, promulgated by the President on Friday,
  • Empowers the Reserve Bank of India to undertake revival plans for banks without imposing a moratorium to avoid disruption of the financial system.
  • In case of Yes Bank, for instance, the government and the RBI first decided to put a moratorium which capped the amount of withdrawal by depositors.
  • It was only after a few days that a new set of shareholders, led by SBI were put in the saddle.
  • Over the years RBI has followed this practice.

What the ordinance does?

  • The ordinance amends Section 45 of the Banking Regulation
  • To enable making of a scheme of reconstruction or amalgamation of a banking company,
  • For protecting the interest of the public, depositors and the banking system and for securing its proper management,
  • Even without making an order of moratorium, so as to avoid disruption of the financial system.




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