RBI feels that it has to have a close checking of the cooperative societies managing cooperative banks as the cooperative societies may pose risks to the whole banking system.
The cooperative banks are formed under the state cooperative societies act and there exists a profusion of legislations surrounding them. The situation needs to be tied up.
Once a uniform law is in place, it would be a lot easier to deal with them. Additionally, RBI is working out an arrangement under which takeover of assets and liabilities of a cooperative bank by the commercial banks would be made much easier.
RBI has already suggested a slew of legal reforms aimed at creating a balanced situation in the banking sector.
The banking laws amendment bill 2011 providing RBI with direct supervisory and regulating power over banks will greatly improve matters. The bill is already before parliament.
The new law may also enable RBI to weed out such elements as have compromised the banking sector.
RBI deputy governor Anand Sinha said all this while addressing the financial planning congress 2011 recently in Mumbai.