In a move aimed at preventing scams in the cooperative banks, the Indian government has adopted legislation to bring those entities under the ambit of India’s central bank — the Reserve Bank of India (RBI).
Until the banking regulations were amended on Sept. 22, the RBI could only issue directives to cooperative banks. The new legislation, however, gives the central bank the right to remove the management of a cooperative bank if it finds the candidate unsuitable to run the bank.
The legislation also allows the central bank to direct cooperative banks to reconstitute their board and for the RBI to supersede the board of the cooperative bank after consulting the state governments concerned. This comes after a multitude of scams, frauds and mismanagement of funds that occurred in cooperative banks.
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