Ordinance amends the Banking Regulation Act as applicable to Co-operative Banks
27 Jun, 2020The President has Promulgated Banking Regulation (Amendment) Ordinance, 2020. This amendment is to ensure better management & sound regulation of Cooperative banks. It would facilitate making of reconstruction/amalgamation Scheme in the interest of public /depositors /banking /proper banking company management.
According to PIB, the Ordinance amends the Banking Regulation Act, 1949 as applicable to Cooperative Banks. The Ordinance seeks to protect the interests of depositors and strengthen cooperative banks by improving governance and oversight by extending powers already available with RBI in respect of other banks to Co-operative Banks as well for sound banking regulation, and by ensuring professionalism and enabling their access to capital. The amendments do not affect existing powers of the State Registrars of Co-operative Societies under state co-operative laws.
What is the effect of the ordinance?
All co-operative banks shall be under the supervisory powers of Reserve Bank of India (RBI) with immediate effect.
Why was the amendment brought?
Following the Punjab and Maharashtra Cooperative (PMC) Banks scam last year, the Banking Regulation Act was amended by the government to strengthen the cooperative banks in the country. Further, the Finance Minister Nirmala Sitharaman also announced during Budget 2020 that cooperative banks shall be brought under the ambit of RBI.
What is the scope of the Co-operative Banking sector?
There are more than 1,500 urban and multi-state cooperative banks across the country where over 8.6 crore depositors have account with total money amounting to nearly ₹4.84 lakh crore.
Which societies are not covered?
The amendments do not apply to Primary Agricultural Credit Societies (PACS) or co-operative societies whose primary object and principal business is long-term finance for agricultural development, and which do not use the word “bank” or “banker” or “banking” and do not act as drawees of cheques.
What is the legal change being brought about?
The Ordinance also amends Section 45 of the Banking Regulation Act, 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.
Effect of the ordinance on the RTI Act, 2005
A public authority is defined under the Section 2 (h) of the RTI Act as under:
"public authority" means any authority or body or institution of self-government established or constituted—
(a) by or under the Constitution;
(b) by any other law made by Parliament;
(c) by any other law made by State Legislature;
(d) by notification issued or order made by the appropriate Government,
and includes any—
(i) body owned, controlled or substantially financed;
(ii) non-Government organisation substantially financed, directly or indirectly by funds provided by the appropriate Government;
This ordinance brings the Co-operative society under the supervision of the RBI. Thus, it raises a possibility of covering the Co-operative society as a body which is controlled by the RBI under the clause “(i) body owned, controlled or substantially financed;”?
Going by this logic, someone can file an application under the RTI Act to the RBI under whose supervision, the co-operative bank is working. So far, the cooperative societies were not directly within the purview of the RTI Act and some degree of information could be obtained through the Registrar.
In the Thalappalam case, the Supreme Court had held that the Cooperative Societies registered under the Kerala Co-operative Societies Act will not fall within the definition of “public authority” as defined under Section 2(h) “public authority” means any authority or body or institution of self-government established or constituted (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other law made by State Legislature; (d) by notification issued or order made by the appropriate Government, and includes any- (i) body owned, controlled or substantially financed; (ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government; “public authority” means any authority or body or institution of self-government established or constituted (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other law made by State Legislature; (d) by notification issued or order made by the appropriate Government, and includes any- (i) body owned, controlled or substantially financed; (ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government; of the RTI Act. The Court observed, “In our view, the categories mentioned in Section 2(h) “public authority” means any authority or body or institution of self-government established or constituted (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other law made by State Legislature; (d) by notification issued or order made by the appropriate Government, and includes any- (i) body owned, controlled or substantially financed; (ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government; “public authority” means any authority or body or institution of self-government established or constituted (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other law made by State Legislature; (d) by notification issued or order made by the appropriate Government, and includes any- (i) body owned, controlled or substantially financed; (ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government; of the Act exhaust themselves, hence, there is no question of adopting a liberal construction to the expression “public authority” to bring in other categories into its fold, which do not satisfy the tests we have laid down. Court cannot, when language is clear and unambiguous, adopt such a construction which, according to the Court, would only advance the objective of the Act.” (Link - http://www.rtifoundationofindia.com/circular/ThalappalamSerCoopBankLtd&Ors-v-StateofKerala&Ors-SCI-Oct13.pdf )
The RBI has been reluctant to disclose the information under RTI Act, such as that related to the defaulters. This ordinance throws up oppurtunites for more disclosure in the scam ridden co-operative banking sector.
(Click to view the Gazette notification on the Ordinance)
OUR EARLIER ARTICLES ON THE TOPIC CAN BE READ AR THE FOLLOWING LINKS:
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SC: Co-operative society does not fall within the definition of “public authority” under RTI Act
Read more at: http://www.rtifoundationofindia.com/sc-co-operative-society-does-not-fall-within-defin#.Xvc2YygzZPY
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Information was sought from Reliance Employees Provident Fund, Bombay - CIC: Mere incorporation under the Indian Trust Act, 1882 & being recipient of tax exemption does not fulfil the conditions of being classified as a “public authority” u/s 2(h)
“public authority” means any authority or body or institution of self-government established or constituted
(a) by or under the Constitution;
(b) by any other law made by Parliament;
(c) by any other law made by State Legislature;
(d) by notification issued or order made by the appropriate Government, and includes any-
(i) body owned, controlled or substantially financed;
(ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government;
“public authority” means any authority or body or institution of self-government established or constituted
(a) by or under the Constitution;
(b) by any other law made by Parliament;
(c) by any other law made by State Legislature;
(d) by notification issued or order made by the appropriate Government, and includes any-
(i) body owned, controlled or substantially financed;
(ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government;
Read more at: http://www.rtifoundationofindia.com/information-was-sought-reliance-employees-providen#.Xvc2LSgzZPY
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Co-operative institutions are also subject to the criminal laws of the country
Read more at: http://www.rtifoundationofindia.com/co-operative-institutions-are-also-subject-crimina#.Xvc2PigzZPY
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A co-operative Society is a closed user group
Read more at: http://www.rtifoundationofindia.com/co-operative-society-closed-user-group#.Xvc2UCgzZPY
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Madras HC rules that Co-operatives are public authority under RTI
Read more at: http://www.rtifoundationofindia.com/madras-hc-rules-co-operatives-are-public-authority-1603#.Xvc2hCgzZPY
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Accounts of a Co-operative society
Read more at: http://www.rtifoundationofindia.com/case-law/accounts-co-operative-society-630#.Xvc2lygzZPY
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Who will inquire into the unaudited account of the cooperative housing society?
Read more at: http://www.rtifoundationofindia.com/who-will-inquire-unaudited-account-cooperative-hou#.Xvc2BygzZPY