Idea that emerges from the above

Recommendations for amendment in state Co-

operative & multi-state cooperative societies

The committee get one repeated suggestion from the cooperators  acts

to transfer the item "Co-operation" to the Union and Concurrent

list so that Union Parliament can legislate on the subject of UCBs

The committee makes the following, seemingly radical but

to curtail the excess of dual control regime.

necessary recommendations :

Ø  RBI should not issue any new license for establishing an

However, considering the federal nature of our polity,

UCB unless it is registered under a Co-operative societies Act or

apprehensions were raised that state govts. would agree to

Multi­State Co-Operative Societies Act, 1984 which has

such transfer. Earlier committees had also suggested that there is

incorporated amendments on the above lines.

a need to address the issue of dual control by carrying out

necessary statutory amendment. However, nothing substantial

Ø  RBI should not sanction license for opening a branch to

has been done till date in this regard. The committee feels that the

existing banks unless the bank is incorporated under a Co-

only effective way to address the problem of dual control is to

operatives societies Act or Multi-State Co-operative societies

carry out amendment in the following Acts:

Act, 1984 which has been amended on the lines suggested by

the committee.

a)

State Co-Operative Societies Act, 1860

b)

Multi ­ State Co-Operative Societies Act, 1984,

Restrictions on enrolling the co-operative societies as

Ø

members should be done away with. It will enable UCBs to lend

c)

Banking Legislation Act, 1949.

their surplus funds to co-op societies like co-operatives engaged

in manufacturing, housing co-op societies etc., as not much

The idea behind amendments is to clearly demarcate the banking

borrowers are available within co-operative fold.

related function which are to be regulated solely by RBI and

Recommendation for Amendment in Banking

those related to establishment of co-operative societies and their

Regulation Act

co-operative character shall remain within the purview of RCS

of the concerned state. The committee has made a list of the

Ø  In the BR Act, 1949, the nomenclature used for UCBs is

banking related functions and co-operative functions to be

"Primary Co-operative Bank" although they have statewide

regulated by RBI and RCS respectively.

presence & even beyond that and handling resources much

larger than DCCBs. Therefore, the term "Primary" should be

deleted, instead they should be referred as UCBs and

Banking Functions (to

Cooperative Functions (to

accordingly, section 5 (ccv) should be modified.

be regulated by RBI)

be regulated by RCS)

Ø  To make suitable amendment in Section 7 of the B.R. Act,

1. Issues related to interest

1. Registration of Co-

1949 primarily to restrict the use of the term `bank', `banker' and

rates, loan policies,

operative Societies.

`banking' to only those societies who have been specifically

investment, prudential

2. Approval & amendment of

licensed to carry out banking business.

exposure norms, forms of

By­laws.

financial statements, reserve

3. Election of Managing

Ø To amendment of section 5 (ccv) and also section 22 of BR

requirements, appropriation

committees.

Act 1949 (AACS), to stop the automatic conversion of Primary

of profits, etc.

4. Protection of members'

Credit Society (PCS) into UCB. As per the present provision "If

2. Regarding branch

rights.

share capital and reserves of a PCS reach the level of Rs.1

licensing and area of

5. Supervision of Managing

lakh, it gets automatically converted into a UCB". It has resulted

operation.

Committee for violation of

in too many PCS converting themselves into UCBs without the

3. Acquisition of assets

items 1-4 above

necessary strength on other parameters and thus become weak

required for carrying on

bank.

banking functions.

4. Policy regarding

Ø Extend the provisions of Section 30 of BR Act, 1949 to

remission of debts.

UCBs also to appoint Chartered Accountant as auditor with

5. Audit

prior approved of RBI. To avoid duplication of audit, necessary

6. Change of Management

amendment should be made in state co-op societies act also.

& Appointment of CEO.

7. Appoint of Administrator.

Ø  The power to remove Director, Chief Executive Officer,

8. Any other banking related

board members and officers of UCBs should be vested with RBI

function to be notified by

only. Therefore, the provision in section 36AA of BR Act 1949

RBI from time to time.

should be extended to UCBs also.

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