Co-Op Banks under RBI

Cabinet committee has promulgated an ordinance to bring around 1500 cooperative banks under the supervision of RBI. This announcement is expected since the scams exposed in the Punjab and Maharashtra Cooperative Bank last year. 

The cooperative banks (State and other) are scheduled banks under RBI Act that should submit Cash Reserve Ratio to RBI but doesn't have supervision by RBI in their CEO appointments, auditing and lending ratio. The purpose of the formation of cooperative societies or banks is to serve a small or rural community by the community itself. These banks were the alternative to other commercial banks that denies access to the downtrodden section of the society.

But these cooperative banks were not functioning as they wanted to. Since there is no auditing and interference by the central bank, corruption and bribery were increased in these banks. Banks instead of proving loans to the needy, they ended providing a large part of its loans to a single party or a small number of people. This cannot be done in other commercial banks since they have RBI guidelines to lend namely priority sector lending, auditing etc. 

Now, the Ordinance is welcome as it brings the appointment of CEOs to the coop banks and audits under the supervision of RBI. Earlier this year RBI has reduced the [lending to capital ratio] for the single borrower and small group to 10% and 25% from 15% and 45%. Also increased the priority sector lending ratio from 40% to 75%. This would solve the problem of corruption, bribery and denial of access to the needy. Also, save the coop banks from financial instability when the large single borrower defaults and save the depositors mainly.

Please Like and Share our Facebook page

Links:

Comments

THE BLOOD BEHIND THE BEAUTY - FOETUS IN COSMECEUTICALS

This article is written by inspiration from the movie “Yashoda” starring Samantha, until watching it, I hardly would have thought the link between fetus and cosmeceuticals. Aftermath of the movie, curiosity peeped in, to know the truth value of facts shown on the screen. So, here is my perception about the film (Yashoda) concerning utilization of fetus in beauty creams. What has been shown in the movie? An institute called Eva, braced by the Central Minister and his associates which targets poor women for making them as surrogates (by fulfilling their monetary needs) to celebrities and huge barons of the society. When those women successfully complete their first trimester, they are handed over to the reticent institute, through the assistance of local hospitals wherein they are sumptuously taken care with all the facilities, but those women are getting widely disconnected from the outside world. Once, they reach their third trimester, they are induced with false p...

Ensuring Growth through Reforms

The world is juggling between economic slowdown and containing the spread of COVID-19, so as India. The previous 21 days lockdown has been extended for 18 more days with a hint of relaxation after April 20th. Does this lockdown help India in containing the virus spread but what would be the aftermath? What would be the situation of the Indian economy? I came across a couple of editorials discussing that the pandemic situation which can be used as a chance to reform the country’s economic policies. And also the authors of those editorials analysed that India would make reformative measures to the economy only when the country faces some crisis (like 1991 economic reform). So this is the time for our policymakers to reform our economic policy and ensure our country overcome the economic slowdown. Inflation and Growth The NDA government is very keen on controlling the inflation within the 4% target by 2021. But as far as the growth is concerned in a developing country inflation contr...

Financial Stimulus Package - for Capitalists

For First, Second and Third tranche See: Twenty lakh crores stimulus package – such a big number The Indian Finance Minister announced the final Fifth tranche of the Atmanirbhar Bharath Abhiyaan Stimulus package on May 17. She has announced many sectoral reforms in her fourth and fifth tranche announcements. Also, she gave the breakup for 20 lakh crores including liquidity, credit guarantee and direct spending. What is the urgency for the sectoral reforms during this pandemic? Does the package is really capable of reviving the economy and helping the situation of distress experienced by the poor, migrant workers etc? Reforms in the core sectors FM announced reforms for the 8 core sectors of the economy in the fourth tranche of the financial stimulus package. The core sectors include Atomic energy, space, Defence, Ordinance factories, Power distribution companies, civil aviation, Minerals and Coal. FM announced there will be Public-Private Partnership in Atomic energy, space and civ...

PROGRESSIVE RATIONALIST

Search This Blog