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Rajya Sabha passes co-operative banks under RBI supervision bill.

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The Rajya Sabha on Tuesday passed the Banking Regulation (Amendment) Bill, 2020, to bring co-operative banks under the supervision of the Reserve Bank of India (RBI).

During the discussion on the bill, finance minister Nirmala Sitharaman told the House that several co-operative banks came under stress during the Covid-19 pandemic and their finances are being closely monitored by banking sector regulator Reserve Bank of India (RBI).

The amendment is to protect the interests of depositors and the legislation will help a quick recovery in cases of stressed co-operative banks without any moratorium, she said.

Sitharaman assured the House that the legislation empowers the central bank to regulate only the banking activities of co-operatives and it is not applicable to a primary agricultural credit society or a co-operative society providing finance for agricultural development.

The bill has already been passed by the Lok Sabha on September 16.

India has different types of co-operative banks — urban co-operative banks (UCBs) and rural co-operative banks (RCBs). RCBs are classified into state co-operative banks (StCBs) and district central co-operative banks (DCCBs). According to the RBI, as on March 31, 2019, there were 1,544 UCBs, 34 StCBs and 352 DCCBs. Total amount of deposits of all UCBs as on March 31, 2019 was Rs 484,315.85 crore and RCBs was Rs 505,859.16 crore.

The amendments do not affect existing powers of the state registrars of co-operative societies under state co-operative laws.

The legislation also enables making of a scheme of reconstruction or amalgamation of a banking entity for protecting the interest of depositors without resorting to moratorium that freeze withdrawals by depositors. The bill replaces an ordinance that was promulgated in pursuance of the commitment “to ensure safety of depositors across banks” by the President on June 26.

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RBI issues guidelines for SRO’s for payment system operators.

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The Reserve Bank on Thursday issued final guidelines, including the framework, to set up a self-regulatory organisation for payment system operators as part of its payment and settlement systems vision.

The Reserve Bank on Thursday issued final guidelines, including the framework, to set up a self-regulatory organisation for payment system operators as part of its payment and settlement systems vision. The framework will enable the central bank to recognize a self-regulatory organisation (SRO) for payment system operators (PSOs). The plan was announced in February 2020 monetary policy. “Interested groups/association of PSOs (banks as well as non-banks) seeking recognition to be an SRO may apply to the chief general manager, department of payment and settlement systems at the RBI,” the regulatory circular said.

An SRO is a non-governmental organisation that sets and enforces rules and standards relating to the conduct of its members to help protect customers and promote ethical and professional standards.

An SRO can help frame rules for system security, pricing practices, customer protection measures, grievance redressal mechanisms, among others, and is expected to resolve the disputes among the members internally through mutually accepted processes to ensure that members operate in a disciplined environment and even accept its penal actions.

The central bank said the SRO shall be set up as a not-for-profit company under the Companies Act of 2013 and only regulated payment system entities such as banks and non-bank PSOs can be members of the SRO.

At least one-third of the members on the board of directors of the SRO shall be independent and not associated with member institutions.

The board shall frame a code of conduct for the members.

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