Rajya Sabha MP K N Balagopal said he had raised issues related to the cooperative sector during the debate on the bill and Finance Minister P Chidambaram had given an assurance to the House that RBI would be directed to make rules to address concerns raised by the member.
He said that as per the existing banking laws, only state cooperative banks are regulated by the Reserve Bank.
"Now as per amendment in Section 56 of the Principle Act the word 'the State Cooperative Banks' is amended as a "Cooperative Bank." Through this amendment every 'Cooperative Bank' will come under the purview of Reserve Bank," Balagopal said.
The MP pointed out that it is not possible for the small village banks with meagre resources to follow all the technical criteria set by RBI including credit ratio, capital adequacy and minimum deposits.
He said the Bill specifically provides provisions to convert all cooperative credit societies in to cooperative banks.
"After the notification of the Act every cooperative credit society will become a bank and they have to follow the Banking Regulations as that of big banks," Balagopal said, adding this will have wide ramifications, and affect the rural credit sector.
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"The cooperative sector, which is the back bone of village and rural credit in many states is going to be finished, if the new Amendments are implemented," he said.
The Winter Session of Parliament had passed the Banking Laws Amendment Bill that would give RBI more regulatory powers.