Banking Regulation (Amendment) Bill 2020 introduced in Lok Sabha

Finance minister Nirmala Sitharaman introduced the Banking Regulation (Amendment) Bill Ordinance, 2020, during the first day of the monsoon session of Parliament on Monday.

The amendments, which were part of the Banking Regulation (Amendment) Ordinance, promulgated on June 26, was aimed at bringing urban and multi-state cooperative banks under the ambit of the Reserve Bank of India (RBI) regulation.

The decision was taken in light of the deteriorating financial position of such cooperatives and to protect deposit holders for any fallout of the impact of the pandemic.


It gave the central bank the power to supersede the board of directors of multi-state cooperative banks in situations where it would be in public interest and that of depositors for the RBI to take over.

The Ordinance also enabled these cooperatives to raise capital through issue of equity shares and other instruments with RBI approval.

Contending the move in Parliament, opposition leaders including Adhir Ranjan Chowdhary and Shashi Tharoor stated that the power to regulate such entities rested with the states and these amendments would diminish the structure of cooperative federalism between the Centre and states.

Additionally, they questioned the motive behind the withdrawal of the Banking Regulation (Amendment) Bill, 2020, which was introduced during the budget session of Parliament but was not taken up as the session was curtailed due to the pandemic.

Sitharaman said the reason behind the withdrawal of the Bill and introduction of a fresh one was because the latter included an additional provision enabling the RBI to make a scheme for restructuring a bank without imposing a moratorium on withdrawal of deposits.

She cited the case of the Punjab and Maharashtra Co-operative Bank (PMC) where depositors were unable to withdraw their money beyond a certain extent for months as the RBI had to impose a moratorium in September last year due to a non-performing asset crisis.

Sitharam further stated that the amendments did not apply to primary agricultural credit societies, cooperative land mortgage banks and any entities which did not use the terms ‘bank’, ‘banker’ or ‘banking’ in their name or in connection with their business.