RBI Governor, PM signal reforms in trouble-prone urban co-operative banks

What is the news?

Reserve Bank of India (RBI) Governor has indicated that the banking regulator will bring in sweeping regulatory changes to reform urban co-operative banks.

The Prime Minister, the Union Finance Minister and the Governor were present at an event to mark the payment of nearly ₹1,300 crore to over 1 lakh depositors whose funds were stuck in distressed banks for years.

PM, speaking at the event, said that an additional three lakh depositors would get their hard-earned savings, stuck in other banks, soon.

What are the views expressed by the PM, the Union Finance Minister and the RBI Governor on various issues?

By the PM:

When the RBI will oversee co-operative banks’ functioning, this will also raise depositors’ confidence further. The Govt has created a new Co-operation Ministry. The idea is to strengthen the co-operative system and empowering the co-operative banks further.

By Union Finance Minister:

Union Finance Minister, also stressed that the approach of the government has been sensitive to the needs of the middle class.

While laws are generally applied prospectively from the date they are passed by Parliament and notified, the Finance Minister said the government made an exception while amending the relevant Deposit Insurance laws.

By RBI Governor:

Urban Cooperative Banks have been plagued by a series of failures, and warned people against parking their savings in banks offering high returns.

Govt’s decision to raise the insured limit for bank deposits to ₹5 lakh from ₹1 lakh with a 90-day time limit to pay out such deposits is a landmark development. But the payment of Deposit Insurance should be seen as a measure of last resort.

The Central bank keeps depositors’ interests on top while dealing with policy challenges and will continue to ensure that the entire banking system remains robust.

RBI has come out with new governance guidelines for commercial banks, and it has constituted a committee for bringing about reforms in the urban co-operative sector. That report has been received, and RBI will be taking action based on it.

Source: This post is based on the article “RBI Governor, PM signal reforms in trouble-prone urban co-operative banks” published in The Hindu on 12th Dec 2021.

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