PMC Bank depositors demand for their money.
PMC Bank depositors demand for their money.
Bhushan Koyande

Nearly 600 urban cooperative banks and 25 multi-state cooperative banks in Maharashtra will now come under the Reserve Bank of India's jurisdiction. These banks will have to compete with commercial and private banks. However, experts argue that some of them may merge with private banks in the due course of time.

This was necessary after the Union Cabinet, on Wednesday, decided to bring government banks, including 1,482 urban cooperative banks and 58 multi-state cooperative banks under the supervisory powers of Reserve Bank of India (RBI). These banks will come under the supervision of RBI with immediate effect from the date of the President’s approval of the ordinance. Maharashtra, with 600 urban cooperative banks and 25 multi state cooperative banks, plays a key role.

After the Punjab and Maharashtra Cooperative (PMC) Bank scam last year, the Union Cabinet, in February, had amended the Banking Regulation Act to strengthen the cooperative banks in the country.

Maharashtra Minister of Cooperation Balasaheb Patil said, “The Centre’s move aims to keep a tab on the cooperative sector. Maharashtra has 60 per cent share in the cooperative sector at the national level. Even though the Centre is saying that the decision was taken to protect depositors’ interest, it was to control the cooperative sector in Maharashtra.’’

On the other hand, Nashik-based Godavari Urban Cooperative Bank chairperson Amruta Pawar said urban cooperative banks have been under the RBI regulations, but rural cooperatives and district cooperatives were under National Bank for Agriculture and Rural Development (NABARD). Now, these banks will also be under RBI’s control. “However, it is not clear what will happen to the dual control of the Ministry of Cooperation over the urban cooperative banks and what will be the fate of the shareholders of cooperative banks,’’ she noted.

Pawar also wanted to know who will conduct the elections to the board of directors of cooperative banks with the new arrangement.

Trade Union Joint Action Committee (Maharashtra) joint convenor Vishwas Utagi said that RBI was the regulator for cooperative banks since the beginning. However, respective states were also supervising the cooperative banking system for so many years. “With today’s decision, the role of state government ends. However, it is apprehended that the cooperative banking system will shrink further paving way for privatisation,’’ he noted.

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