Which Act will the said bill amend?
The Banking Regulation (Amendment) Bill, 2020 will amend the Banking Regulation Act, 1949 and the Act will be called the Banking Regulation (Amendment) Act, 2020.
Why were amendments needed under the Banking Regulation Act, 1949?
Certain amendments were considered necessary in the said Act to provide for better management and proper regulation of co-operative banks and to ensure that the affairs of the co-operative banks are conducted in a manner that protects the interests of the depositors, by increasing professionalism, enabling access to capital, improving governance and ensuring sound banking through the Reserve Bank of India.
Further amendments were proposed to be made in Section 45 of the Act to enable the Reserve Bank of India to make a scheme to protect the interests of the public, the banking system, depositors or to secure the banking company’s proper management, without first making an order of moratorium so as to avoid disruptions in the financial system
How did COVID-19 impact the economic situation?
As the economic situation arising from the COVID-19 pandemic had increased the stress in both co-operative banks and banking companies, there was an immediate need for legislation in this regard.
As Parliament was not in session, the Banking Regulation (Amendment) Ordinance, 2020 was promulgated by the President of India on the 26th day of June, 2020 under clause (1) of Article 123 of the Constitution.
Salient Features of the Bill:
(i) substitution of Section 3 to provide that the Act shall not apply to— (a) a primary agricultural credit society; or (b) a co-operative society whose primary object and principal business is providing of long term finance for agricultural development if such society does not use as part of its name, or in connection with its business, the words “bank”, “banker” or “banking” and does not act as drawee of cheques;
(ii) Amendment of Section 45 to address the potential disruptions in the financial system by providing for the Reserve Bank of India to prepare a scheme for the reconstruction or amalgamation of the banking company without the necessity of first making an order of moratorium;
(iii) Amendment of Section 56 to provide that notwithstanding anything contained in any other law for the time being in force, the provisions of the Act shall apply to co-operative societies, subject to the modifications specified therein
Read the detailed bill, here: BILL
The Banking Regulation (Amendment) Bill, 2020 was passed in Lok Sabha on 16-09-2020.