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President Promulgates Major Banking Reform

Saumy Deepak Tripathi
Saumy Deepak Tripathi

The Banking Regulation(Amendment) Ordinance 2020 was promulgated by President Ram Nath Kovind to promote an environment for depositors in banks across the country. 

The new ordinance will amend 1949, Banking Regulation Act and seeks to improve the management, regulation and governanceof the Co-operative banks. The reform is a part of a series of reforms which have been passed by the government to make trade and commerce easy for the producers. Cooperative Banks are one of the most important sources of loans for the farmers of the country. 

The bill will provide the banks with the authority to provide equity shares, preference shares, or special shares on face value or at a premium to both members and non-members in the area of operations 

It has laid down specific conditions under which the Reserve Bank of India can supersede the board of directors of a cooperative bank for a period of five years. It also has provided special powers to exempt certain regulations of the cooperative banks. 

The amendments do not affect existing powers of the State Registrars of Co-operative Societies under state co-operative lawsnor do they apply to Primary Agricultural Credit Societies (PACS) or co-operative societies whose aim is tong term finance and do not use the term “bank”, “banker” and “banking”. 

The Ordinance also amends Section 45 of the Banking Regulation Act, to enable making of a scheme of reconstruction or amalgamation of a banking company for protecting the interest of the public, depositors and the banking system and for securing its proper management, even without making an order of moratorium, so as to avoid disruption of the financial system. 

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