The Reserve Bank acts in close co-ordination with other regulators, such as, Registrar of Co-operative Societies and Central Registrar of Co-operative Societies. The Reserve Bank enters into Memorandum of Understanding (MoU) with Central Government and all State Governments which have presence of UCBs to ensure greater convergence of policies on regulation and supervision. Starting with signing first MoU with the State of Andhra Pradesh on June 27, 2005 and the last with the State of Telangana on December 30, 2014, today, all the UCBs in the country are covered under MoU
Though the Banking Regulation Act came in to force in 1949, the banking laws were made applicable to cooperative societies only in 1966 through an amendment to the Banking Regulation Act, 1949. Since then there is duality of control over these banks with banking related functions being regulated by the Reserve Bank and management related functions regulated by respective State Governments/Central Government.
The Reserve Bank regulates the banking functions of StCBs/DCCBs/UCBs under the provisions of Sections 22 and 23 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies (AACS).
As part of the arrangements under MoU, the Reserve Bank constitutes a State-level Task Force for Co-operative Urban Banks (TAFCUB) for UCBs which operate only in one State. A Central TAFCUB is constituted for the Multi-State UCBs. TAFCUBs bring all the decision-makers with regard to UCBs on one table, thus facilitating quick decision-making. TAFCUBs identify potentially viable and non-viable UCBs in the states and suggest revival path for the viable and non-disruptive exit route for the non-viable ones. The exit of non-viable banks could be through merger/amalgamation with stronger banks, conversion into societies or liquidation as the last option.
The State Governments/Central Governments may, for instance, through the MoU, agree to take immediate action on requisitions of the Reserve Bank for supersession of the Board of Directors, appointment of liquidators, initiating action for removal of CEO/Chairman of a bank, enhancing quality of HR and IT resources in the banks on the lines required by the Reserve Bank, work to raise the standards of corporate governance by putting in place certain minimum fit and proper criteria for members to be eligible for seeking election for the post of director, institute special audit by Chartered Accountants and furnish reports of the findings within a given time frame, introduce long form audit reports for conducting statutory audit, modify its audit rating models to bring it on par with the rating system of the Reserve Bank and conduct statutory audit only through external Chartered Accountants in respect of banks with deposits over a specified minimum level.
The Department of Co-operative Bank Regulation (DCBR) regulates State Co- operative Banks (StCBs), District Central Co-operative Banks (DCCBs) and Urban Cooperative Banks (UCBs).
Reserve Bank of India Act, 1934
Banking Regulation Act, 1949
Deposit Insurance and Credit Guarantee Corporation Act
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