Centre to bring Ordinance to get Cooperative Banks under RBI supervision

The Cabinet on Wednesday approved a slew of proposals, including an ordinance bringing cooperative banks under supervisory powers of the Reserve Bank of India and a Rs 1,542-crore interest subvention scheme in micro loans.

The Cabinet also cleared a Rs 15,000-crore fund for animal husbandry announced as part of Atmanirbhar Bharat Abhiyan stimulus package, and approved already-announced reforms in the space sector to boost private sector participation, and upgrade of Kushinagar airport in Uttar Pradesh to international.

COOPERATIVE BANKS
Following the cabinet decision, 1,482 urban cooperative banks and 58 multi-state cooperative banks will come under the central bank’s oversight, which would mean tighter supervision.

RBI’s powers on scheduled banks would be hence applicable on cooperative banks as well. “The decision to bring 1,540 cooperative banks under RBI's supervision will give an assurance to more than 8.6 crore depositors in these banks that their money amounting to Rs 4.84 lakh crore will stay safe,” Union minister Prakash Javadekar said. The banks will come under RBI supervision with immediate effect from date of President’s approval on the ordinance.

Cooperative banks had for a long been a weak link in the financial system because of lack of adequate oversight. While RBI has been regulating and supervising banking functions, primary oversight has been with the registrar of societies. The Union cabinet had in February this year approved amendment to the Banking Regulation Act to bring cooperative banks under the RBI. The ordinance will implement provisions immediately while law is amended in Parliament.The proposal had been announced in the budget this year.

INTEREST SUBVENTION
The Cabinet also approved a scheme for interest subvention of 2% to ‘shishu’ loan category borrowers for one year under the Pradhan Mantri Mudra Yojana. This will be available to amount outstanding as on March 31, 2020. As on that date, about 93.7 million loan accounts with a total loan amount of about Rs 1.62 lakh crore were outstanding as per official figures.

"The scheme has been formulated as a specific response to an unprecedented situation and aims to alleviate financial stress for borrowers at the ‘bottom of the pyramid’ by reducing their cost of credit," the government said in a statement. Under the shishu category, Micro Units Development and Refinance Agency (Mudra) gives up to Rs 50,000 loans to micro enterprises.

ANIMAL HUSBANDRY
The Rs 15,000-crore Animal Husbandry Infrastructure Development Fund (AHIDF) is expected to help infrastructure investment in dairy, meat processing and animal feed plants. Its eligible beneficiaries include farmer producer organisations, micro, small and medium enterprises (MSMEs), private companies, and individual entrepreneur with only 10% margin money contribution by them. The balance 90% would be bank loans. “The measures would also help in direct and indirect livelihood creation for about 35 lakh persons,” an official said.

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