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An Ordinance to amend Banking Regulation Act, 1949 has been promulgated to enable RBI to issue license to Multi State Cooperative Societies to carry on Banking Business. The Deposit Insurance Cover for deposit in the Urban Cooperative Banks registered under the Multi-State Cooperative Societies Act in the interest of the small depositors is also extended.
Supreme Court vide its judgement dated 29.10.2003 in the case of Apex Urban Cooperative Bank of Maharashtra & Goa Ltd. vs Maharashtra State Cooperative Bank Ltd. and others in CA No. 439 of 1997 with CA No. 8478 of 2003 decided that RBI cannot issue banking licenses to a society registered under the Multi State Cooperative Societies Act (MSCS Act), 1984. In view of the specific directions given by the Supreme Court, RBI cancelled the license issued to Apex Urban Bank w.e.f. 30.10.2003. There are 34 other Urban Cooperative Banks registered under the MSCS Act, 1984, which have been licensed under the provisions of Banking Regulation Act, 1949. In view of the above ruling of Supreme Court, doubts have been expressed about the legality of the licenses issued to these Urban Cooperative Banks. In order to clear these doubts and to resolve any problem, that might arise in the future, it was necessary to amend the Banking Regulation Act, 1949.
The amendments will enable RBI to issue licences to cooperative societies registered under the Multi State Cooperative Societies Act, 2002, to provide the licences granted to the existing Multi State Cooperative Banks (MSCBs) shall be deemed to have been validly granted. The MSCBs have also become ‘eligible banks’ under Section 2 (gg) of the DICGC Act so that their deposits can be insured by the Deposit Insurance Credit Guarantee Corporation.
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