Banking Act to be amended soon
07 Nov 2001
Mumbai: The central government is likely to amend the Banking Regulation Act, 1949, in the coming parliament session. In terms of the amendment, all regulatory and supervisory functions of scheduled and non-scheduled urban cooperative banks (UCBs) will be vested exclusively with the RBI.
At present, UCBs are regulated and supervised by the Registrar of Cooperatives as well as the RBI. The accounts of UCBs are audited by concerned state governments, while matters like prudential norms, capital adequacy and risk management norms are regulated by the RBI.
The government is not in favour of creating a separate apex supervisory body to regulate the UCBs as it feels that even with the existing constraints, the RBI is doing a good job of supervising UCBs and there is no need for a separate body.
The RBI conducts statutory inspections once in two years in respect of scheduled UCBs and once in two-to-three years in respect of non-scheduled UCBs. Identified weak banks are inspected on an annual basis.
The RBI is expected to step up the frequency of audits, inspection and reporting of UCBs, because many UCBs suffer from lack of transparency, professionalism, disregard for established lending norms and are prone to insider borrowing.
