With the amendments, RBI will be able undertake a scheme of amalgamation of a bank without placing it under moratorium. Earlier, if a bank was placed under moratorium, it not only limited withdrawals by depositors, but also disrupted a bank’s lending operations.
The cooperative banks will also be allowed to raise money via public issue and private placement, of equity or preference shares as well as unsecured debentures, with the central’s bank’s nod. Currently, access to capital for cooperative banks is limited.
In March, finance minister Nirmala Sitharaman tabled in the Lok Sabha the amendments to the Banking Regulation Act, 1949. However, due to the outbreak of the covid-19, the Parliament could not approve the changes. Thereafter, on June 26, an ordinance was promulgated.