RBI Cracks Down on Urban Cooperative Banks in Maharashtra, Penalizes 103 Banks In Last Two Years
Pune, 16th May 2023: An increasing number of urban cooperative banks in Maharashtra are facing penal action from the Reserve Bank of India (RBI) since the transfer of regulatory powers in the aftermath of the Punjab and Maharashtra Co-operative Bank scam. In the financial years 2021-22 and 2022-23, the RBI has taken action against 103 banks in Maharashtra alone.
In June 2020, the Central Government amended the Banking Regulation Act to empower the RBI with the regulation of urban cooperative banks. This move was prompted by the notorious scam that unfolded at the Punjab and Maharashtra Co-operative Bank, leading to public outrage and the subsequent amendment of the Act. Since the transfer of regulatory powers to the RBI, the number of penal actions against cooperative banks has been on the rise. In the inaugural year of regulation in 2022, only 22 banks faced penalties.
Nationwide, the RBI has taken action against a total of 320 banks in the last two financial years. Among these, 297 are cooperative banks, while the remaining include multinational banks, corporate banks, and nationalized banks. Maharashtra, with approximately 30 percent of the total cooperative bank operations, has witnessed the highest number of penal actions, with 103 banks facing penalties. The state is home to 484 cooperative banks, and nearly 20 percent of them have faced prosecution in the last two years.
Following Maharashtra, Gujarat ranks second with 50 cooperative banks facing action. Other states with banks subjected to action include Madhya Pradesh (27 banks), Uttar Pradesh (13 banks), Chhattisgarh (11 banks), Andhra Pradesh (11 banks), and Tamil Nadu (12 banks). In contrast, the number of banks facing action in other states remains in the single digits.
Critics from the cooperative banking sector have expressed their dissatisfaction with the RBI’s actions, arguing that the focus appears to be primarily on cooperative banks in Maharashtra. As Maharashtra boasts the largest number of cooperative banks in the country, some argue that the lack of actions against banks in other states raises concerns about the fairness of the regulatory process. There are objections to what is seen as stringent inspections specifically targeting cooperative banks in Maharashtra.
The breakdown of RBI’s actions on cooperative banks from April 1, 2021, to March 31, 2023, reveals:
Maharashtra: 103 banks
Gujarat: 50 banks
Madhya Pradesh: 27 banks
Uttar Pradesh: 13 banks
Chhattisgarh: 11 banks
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