The Hindu : Business : Ordinance to amend Banking Regulation Act

Online edition of India's National Newspaper
Saturday, Oct 02, 2004

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Ordinance to amend Banking Regulation Act

By Our Special Correspondent

NEW DELHI, OCT. 1. An Ordinance to amend the Banking Regulation Act, 1949 has been promulgated to enable the Reserve Bank of India to issue licences to Multi-State Cooperative Societies to carry on banking business. The Deposit Insurance Cover for deposits in the Urban Cooperative Banks registered under the Multi-State Cooperative Societies Act has also been extended to protect the interests of small depositors.

The amendment to the Banking Regulation Act was necessitated by a Supreme Court judgment of October 29, 2003 holding that the RBI cannot issue banking licences to a society registered under the Multi-State Cooperative Societies Act (MSCS Act), 1984. In view of the specific directions given by the Supreme Court, the RBI cancelled the licence issued to Apex Urban Bank with effect from October 30, 2003. There are 34 other urban cooperative banks registered under the MSCS Act, 1984, which had been granted licences under the provisions of Banking Regulation Act, 1949. In view of the ruling, doubts had been expressed about the legality of the licences issued to these urban cooperative banks. In order to clear these doubts and to resolve any problem, that might arise in the future, the Government thought it fit to amend the Banking Regulation Act, 1949.

The amendments will enable the RBI to issue licences to cooperative societies registered under the Multi-State Cooperative Societies Act, 2002, and the licences granted to the existing Multi-State Cooperative Banks (MSCBs) would be deemed to be valid. The MSCBs have also become `eligible banks' under Section 2 (gg) of the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act

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