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RBI can frame revival program for all banking companies without imposing moratorium

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President Ram Nath Kovind on Friday promulgated an Ordinance to give the Reserve Bank of India (RBI) much more supervisory powers more than city and multi-point out co-operative banks.&#13
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Aside from the regulatory variations connected to co-operative banks, one particular of the essential modifications the Ordinance would make in the current legislation, the Banking Regulation Act, 1949, is to enable the RBI to frame a reconstruction or amalgamation plan for all banking companies “even without earning an order of moratorium, so as to stay away from disruption of the monetary system”, a press statement issued by the finance ministry on Saturday claimed.&#13
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The RBI has to impose restrictions on lending and withdrawal pursuits prior to it can body a revival scheme for industrial and co-operative banks, in accordance to the previous law.&#13
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In March, the RBI had imposed a two-7 days moratorium on personal lender Indeed Bank, restricting withdrawals to Rs 50,000 per depositor, when simultaneously appointing an administrator and framing a revival prepare for the bank with the aid of the central government. This produced stress amongst the depositors, who rushed to withdraw their income, as the moratorium was perceived by them as a indication that their money was not risk-free. A very similar predicament arose in all other conditions wherever the RBI imposed a moratorium in the previous.&#13
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ALSO Go through: HC queries Centre, RBI on remedy to PMC Bank depositors from Of course Bank&#13
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The Ordinance also empowers the RBI to frame an enforceable reconstruction plan for co-operative banks, just like it does in the scenario of industrial banking companies (like Yes Bank). It even more allows the RBI to body governance norms for the co-operative banks akin to all commercial banking companies.&#13
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“The Ordinance seeks to protect the passions of depositors and bolster co-operative banks by increasing governance and oversight by extending powers presently accessible with RBI in respect of other banks to co-operative banks as well as for audio banking regulation, and by ensuring professionalism and enabling their entry to capital,” the press assertion mentioned.&#13
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The amendments, having said that, will not implement to primary agricultural credit societies (PACS), or co-operative societies, whose primary object and principal enterprise is prolonged-term finance for agricultural enhancement, and which do not use the word “bank” or “banker” or “banking” in their name.&#13
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The RBI had in September 2019 started out imposing limits on Punjab and Maharashtra Cooperative (PMC) Bank after it learned economic irregularities, hiding and misreporting of financial loans provided to one bank loan account belonging to serious estate developer HDIL. The limitations will continue to remain in spot until December 2020, though the regulator has been soothing it from time-to-time based on the financial position of the urban co-operative bank.&#13
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For now, the RBI has outdated PMC Bank’s board and appointed an administrator, although barring the bank from lending and accepting clean deposits.&#13

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