"We are trying to bring this amendment to protect the depositors. As in some unfortunate situation in banks, depositors are put to hardship," the finance minister said in the Lok Sabha on Wednesday.

"The financial status of 277 urban cooperative banks is weak.105 cooperative banks are unable to meet the minimum regulatory capital requirement. 47 banks have net worth in negative," she further mentioned adding 328 urban cooperative banks have more than 15% gross NPA ratio.

With the amendments, RBI will be able undertake a scheme of amalgamation of a bank without placing it under moratorium. Prior to this amendment, if a lender was put under the moratorium, it not only capped the withdrawals by depositors, but also barred a bank’s lending operations.

Few more amendments have been proposed under section 45 of the act that will help the central bank to develop a scheme to ensure the interest of the public, banking system, account holders in the bank and banking company’s proper management, without disrupting any banking functionalities. However, the changes will not affect the existing powers of the state registrars of co-operative societies under state laws.

In June, the union cabinet on approved the ordinance to bring 1,482 urban and 58 multi-state cooperative banks under the supervision of the central bank. The government on Monday introduced a bill in the Lok Sabha to amend the Banking Regulation Act.

"Yes, we did come up with the Bill (in March 2020) and subsequently an ordinance was passed because the session was not on to consider the bill, discuss the bill and then pass it... ordinance became a necessity," Sitharaman said earlier on Monday.

"We were going through pandemic and there was stress in several cooperative banks and as a result of which it was felt that till we clear the bill there should not have a situation where many of the cooperative banks should suffer and therefore we brought in an ordinance in place with the essential features of the bill which was tabled in the house in March," she noted.