New Delhi: The Kerala Government's move to secure primary societies in the cooperative sector from stringent guidelines of the Reserve Bank of India (RBI) has received a setback with the Union Finance Ministry confirming that such entities cannot use the term "cooperative bank".
Kerala's plea demanding the nod to continue use the term "cooperative bank" has been rejected by the RBI, Finance Minister Nirmala Sitharaman informed the Lok Sabha on Monday.
The RBI has conveyed that it cannot call back alert notices that have been issued to safeguard the interests of the public, she added.
Recently, the RBI came up with stringent provisions to regulate primary cooperative societies based on the Banking Regulation Amendment Act passed by Parliament in September. As per the central bank guidelines cooperative societies should not use the term "cooperative bank".
Through a note the RBI also restrained the cooperative societies from taking deposits from those members who do not have voting rights.
The new decision by the RBI is expected to adversely affect the functioning of almost 1,625 primary cooperative societies and thousands of other cooperative banks in Kerala alone.
The Kerala Government was planning to approach the Supreme Court against the RBI decision to impose stringent regulatory measures on the primary cooperative societies and banks.
The state government fears the new norms would hamper the smooth functioning of the cooperative societies. It is yet to effectively implement the provisions of the new central law on banking regulation. It was even alleged that the Central Government is now trying to put pressure on the State to implement the same by issuing the guidelines.
