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Currently, urban co-operative banks in Punjab are under the dual control of the RBI and the Registrar of Cooperatives, which undermines their capacity to function without manipulation.
While the RBI is authorised to issue or cancel licences, it is the state government that's responsible for audit, CEOs' appointments and the supersession of boards, which is done through the Registrar of Cooperative Societies.
"Very large-scale misappropriation of funds had taken place in urban cooperative banks in Maharashtra and Gujarat, which prompted RBI to end the dual control regime," says Cooperatives Minister Capt Kanwaljit.
"Our government is trying to implement RBI guidelines to improve the functioning of these banks," he added.
Punjab is the 15th state in the country to ink the MoU, while the neighbouring Haryana has already signed it and Himachal is yet to do it. The move to hand over effective control of UCBs to RBI was met with political resistance in Maharashtra and Gujarat, where urban cooperative banks were controlled by influential politicians.
The Madhava Rao Committee on UCBs had recommended that the dual control over UCBs must end as that was stifling their growth and RBI should be the sole regulator of banking businesses carried out by these banks. The Narsimham Committee II had also unequivocally recommended ending dual control regime.
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