The Kerala High Court on Thursday issued notices to the Centre and the Reserve Bank of India (RBI) on a writ petition challenging the amendments to the Banking Regulation Act which have brought the urban cooperative banks under the direct supervision of the RBI and made applicable to them the governance norms of commercial banks.
The petition was filed by Thiruvalla East Cooperative Bank Ltd. and Guruvayur Cooperative Urban Bank. The petitioner said the urban cooperative banks were now forced to constitute a board of management and appoint a CEO/managing director which would function as a parallel power centre along with the board of directors elected by the general body of the cooperative societies.
The petitioners pointed out that, in fact, the RBI had issued a circular in accordance with the amendments containing the procedure of appointment/termination of the MD/CEO, BoM and their qualifications. As per the amendments, the cooperative societies could not now amend their bylaws without the sanction of the RBI.
The amendments brought in 2020 had nullified the provisions of the Kerala Cooperative Societies (KCS) Act and Rules and the power granted to the general body of the societies as per the KCS Act. The amendments were brought on the strength of the 97th Constitutional Amendment, 2011, whereby 2nd Proviso to Article 243ZL made all the provisions of Banking Regulation Act, 1949, applicable to all cooperative societies doing the business of banking.
As a result of the amendments, the power to fix the maximum number of directors of cooperative societies and the duration of the term of office of elected members of the board of cooperative societies were now put in the hands of the Central Government.
The petitioners contended that the amendments had transgressed into the provisions of the KCS Act framed under item 32 in List II. Therefore, the amendments were unconstitutional.
