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Govt mulls change in Banking Act, more powers for RBI

After the Madhavpura Bank pay-order scam, the government is considering amending the Banking Regulations Act to give extra teeth to the Reserve Bank of India in regulating the urban cooperative banks even as the central bank has decided to impose tighter capital adequacy ratio norms for such banks from March 2002.

"We are considering amendments in the Banking Regulations Act to give more powers to the RBI," banking secretary Devi Dayal said at a seminar on UCBs organised by FICCI on Thursday.

The additional powers would enable RBI to carry out changes in management and dismiss the bank chief in case of any major drift from prudential guidelines, he indicated.

Dayal said so far UCBs were not required to maintain a minimum CAR, but it was important from the point of view of depositors and credibility of the banks.

The UCB issue would be taken up in the next meeting with chief ministers of states.

RBI deputy governor Jagdish Capoor said UCBs would be asked to maintain the same rate of CAR as that of public sector banks after 3-4 years.

"It (CAR) will come at the same level of PSBs. A process has started. A CAR norm would be implemented for UCBs from March 2002 in a phased manner," he said.

Concerned over the dual regulatory framework after the Madhavpura Mercantile Bank imbroglio, Capoor said, RBI has asked states to amend their respective Co-operative Acts to empower the central bank with more powers.

"We have requested states persistently to take up this issue. Some states have made amendments but others have not. We can't amend Banking Regulations Act to override the state legislations," he said.

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