The YSR Congress Party, which backs the Banking Regulation (Amendment) Bill, 2020, has opined that the cooperative banks, with the passage of the bill, will be able to raise capital through equity and unsecured debentures and bonds which will strengthen their balance sheet.
Lavu Srikrishnadevarayulu, MP of Narasaraopet, said that the party welcomed the bill as it would give a fresh lease of life to the ailing cooperative banking sector.
The MP said it was disheartening to hear the current distress in the cooperative banking sector and the Financial Stability Report of the RBI noted that their capital risk adequacy ratio declined from 13.5% to 9.8%. Cooperative institutions like PMC Bank where the depositors were hurt because the withdrawal limit was capped at ₹1,000 in September 2019 and Mapusa Cooperative Bank and CKP Cooperative Bank, the licences of which were cancelled by the RBI in 2020 because of poor management and bad performance were cited as some examples.
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“This could have happened because their Non-Performing Assets (NPAs) almost doubled in one financial year as the auditors did not do their job properly. With this Bill coming in, RBI will be able to supersede the Board of Directors who are not performing professionally. Reconstruction and amalgamation of the banks will be taken up without placing the bank under moratorium and that will be in the interests of depositors,” said the MP.
Further, cooperative banks will be able to raise capital through equity and unsecured debentures and bonds which will help them strengthen their balance sheet and hence the YSRCP supports the bill, according to the MP.
A note of cautionADVERTISEMENT
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He also sounded a note of caution and said that the government should take note of the scams and frauds taking place in PSBs where the total fraud value increased 134% year-on-year within a year.