No stay on order to bring co-op banks under RBI

CHENNAI: A division bench of the Madras High Court on Monday refused to grant an interim stay on the Ordinance promulgated by the Centre to bring co-operative banks under the purview of the Reserve Bank of India (RBI).

The petitioner banks -- Big Kanchipuram Cooperative Town Bank Ltd and Velur Cooperative Urban Bank Ltd -- had challenged the Ordinance promulgated on June 26, of certain sections of the Banking Regulation Amendment Ordinance, 2020. According to their plea, the subject of governance of co-operative banks fell exclusively within the competence of the State legislature, and the ordinance was trenching upon the State’s rights, and was liable to be struck down.

Countering the submissions made by the State, senior counsel AL Somayaji, appearing for the RBI, contended that a cooperative society, when involved in banking activities, fell under the purview of the parliament.

The two-member bench, headed by Chief Justice AP Sahi and Justice Senthil Kumar Ramamoorthy observed: “Unless there was an imminent tangible cause or evidence indicating actual invasion of the rights of the petitioner banks in running the affairs of the society, it would not be appropriate to consider the issue of interim relief at this stage.” The bench also observed that the plea will be considered if the Central government or the RBI interferes in the functioning of the affairs of the society in the future. The court also directed the RBI and the Centre to file their counter, and adjourned the matter by four weeks.