Corruption
RBI Cancels Licenses of These Co-Operative Banks, Tightens Grip on Regulatory Compliance
In a major regulatory crackdown, the Reserve Bank of India (RBI) has canceled the licenses of 58 Urban Co-operative Banks (UCBs) since 2020, Union Minister of State for Finance Pankaj Chaudhary informed the Lok Sabha on Monday.
This decisive action follows the implementation of the Banking Regulation (Amendment) Act, 2020, which has significantly enhanced the RBI’s oversight of cooperative banks. The amendments, in effect since June 26, 2020, introduced stringent regulations governing management, audits, capital adequacy, and bank reconstruction or mergers, aiming to fortify the sector against financial instability.
Stronger Governance, Greater Oversight
With the amendments in place, cooperative banks are now subject to stricter governance provisions under Sections 10, 10A, 10B, 35B, and 36AB of the Banking Regulation Act. These measures reinforce regulatory scrutiny, ensuring better management and financial discipline in the sector.
To protect depositors, the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act provides an insurance cover of Rs 5 lakh per depositor for all types of bank deposits—savings, fixed, current, and recurring accounts. This limit, raised from Rs 1 lakh to Rs 5 lakh in February 2020, may be revised in the future based on DICGC’s financial standing and the broader interests of the banking system.
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RBI Slaps Penalties on Five Co-operative Banks
In a separate enforcement action on Monday, the RBI imposed monetary penalties on five cooperative banks for failing to comply with regulatory norms. The penalized banks and their violations include:
- Gurdaspur Central Cooperative Bank (Punjab) – Fined Rs 1 lakh for breaching provisions under Section 20 read with Section 56 of the Banking Regulation Act, 1949.
- Baramulla Central Cooperative Bank (Jammu & Kashmir) – Penalized Rs 5 lakh for disregarding RBI directives prohibiting fresh deposit acceptance.
- Anantnag Central Cooperative Bank (Jammu & Kashmir) – Slapped with a Rs 1 lakh penalty for similar violations.
- Jogindra Central Cooperative Bank (Himachal Pradesh) – Fined Rs 1 lakh for contravening banking regulations.
- Janata Sahakari Bank (Gondia, Maharashtra) – Penalized Rs 1.5 lakh for violating Section 26A read with Section 56 of the Act.
These penalties, issued under Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the Banking Regulation Act, highlight the RBI’s zero-tolerance approach toward non-compliance in the cooperative banking sector.
A Push for Stability in the Cooperative Banking System
The RBI’s intensified regulatory actions underscore its commitment to strengthening financial stability and safeguarding depositors’ interests. With governance lapses in cooperative banks becoming a growing concern, the central bank continues to tighten its grip, ensuring that the sector operates within a framework of transparency, accountability, and financial prudence.