Centre considering separate regulator for co-op banks

The government is contemplating a separate regulator for cooperative banks and restrict the role of the Reserve Bank of India (RBI).

Senior government officials said in any case the provisions on regulating cooperative banks, as proposed in the earlier Bill last year by vesting all powers with the central bank was being watered down.

At a consultative committee meeting today, Parliamentarians also suggested that regulation of cooperatives should not be in RBI's domain alone. The changes are proposed to be made through amendments to the Banking Regulation (BR) Act.

Last year, the government had introduced a Bill to amend the BR Act, which among other things, proposed regulation of all banking activities of cooperatives by the RBI.

At present, the registrar of cooperatives in the states and the RBI are the joint regulators. The earlier Bill has lapsed as the 13th Lok Sabha was dissolved last year.

Officials said that the Bill, with watered down provisions, has been referred to the RBI, which will revert back to the finance ministry shortly.

Apart from regulator of co-operative banks, the government also proposes to prescribe lower cash reserve ratio and statutory liquidity ratios for banks.

The vexed issue of aligning voting rights for foreign investors in private banks with the shareholding is also proposed to be addressed through amendments to the BR Act. At present, the voting right of a foreign investor in a private bank is capped at 10 per cent.

The finance ministry intends to introduce the Bill during the current session of parliament itself, which resumes after a three week recess on April 18.