Banking Amendment Bill will protect interests of depositors, assures FM Sitharaman

NEW DELHI: Finance Minister Nirmala Sitharaman on Tuesday said that the amendment in the Banking Regulation Bill will completely protect the interest of depositors and will help with quick recovery in cases of stressed co-operative banks without any moratorium.

The Bill will allow the Reserve Bank of India (RBI) to undertake amalgamation or reconstruction of a bank without placing it under a moratorium. “If at all we need to restructure any such co-operative banks then we need to be restructured without a moratorium period.

By amending Section 45 we are able to give a quick recovery, quick payback, and also make sure the interests of the depositors are safeguarded,” Sitharaman said in Rajya Sabha, tabling the Banking Regulation (Amendment) Bill 2020. The Rajya Sabha passed it through a voice vote. The amendment was passed in Lok Sabha on September 16.

The Bill also comes against the backdrop of the PMC Bank scam, which was put under RBI directions after the discovery of a fraud and significant financial irregularities, leaving thousands of customers stuck with their money since last one year. Citing example of Yes Bank, Sitharaman said that the government was able to quickly resolve the crisis-hit YES Bank as it was governed by commercial bank rules, but “even till today, the PMC Bank solutions are not completely emerging, thus putting the depositors into difficulty” the minister said, adding that the amendment will help in quick resolution.

She informed that about 277 urban cooperative banks have reported losses, 105 urban cooperative banks are unable to meet the minimum regulatory capital requirements and 47 are having a negative networth. Besides, 328 urban cooperative banks have more than 15 per cent gross NPA ratio, as of March 2019. As on March 2020 the gross NPA ratios of urban cooperative banks stood at 10 per cent. That apart, the Companies (Amendment) Bill, 2020 was also passed on Tuesday.