Executive Summary:
The Banking Regulation Amendment Act, 2020, further amends the Banking Regulation Act, 1949. It received presidential assent on September 29, 2020, and is published for general information. Most sections of the act are deemed to have come into force on June 26, 2020, except for section 4 concerning primary cooperative banks (June 29, 2020) and state/central cooperative banks (date to be notified).
Key Points / Main Content:
* **Applicability:**
* The Act does not apply to primary agricultural credit societies.
* It also does not apply to cooperative societies focused on long-term agricultural finance, provided they do not use "bank" terminology or act as drawees of cheques.
* **Amendments to Section 45 (Reconstruction/Moratorium):**
* Marginal heading changed from "reconstitution" to "reconstruction."
* Expands the powers during moratorium to include granting loans/advances and making investments.
* Allows actions "at any other time" during moratorium.
* References to the "date of the order of moratorium" are replaced with "reconstruction or amalgamation."
* Removes references to "subsidiary bank" in subsection 15.
* **Amendments to Section 56 (Cooperative Banks):**
* Overriding effect over other laws.
* Defines terms like "memorandum of association" and "Registrar" for cooperative banks.
* Omission of clause d, subclauses i and iii of clause e, clauses fi, fii and g, clauses l, n and p, subclauses ii and iv of clause q, clauses r, ria and sa, subclause i of clause t, clauses u, v, x, y, z and za.
* **Section 12 Substitution (Share Capital):**
* Cooperative banks, with Reserve Bank approval, can issue equity shares, preference shares, special shares, unsecured debentures or bonds (minimum 10-year maturity) through public or private placement, subject to RBI conditions.
* Restrictions on demanding payment for share surrender and share capital withdrawal/reduction, subject to RBI conditions.
* **Section 36AAA Amendment:**
* References to "multi-State cooperative bank" changed to "cooperative bank."
* Requires Reserve Bank to consult with State Governments before issuing orders to cooperative banks registered with State Registrars.
* Section 36ACA does not apply to cooperative banks.
* Section 36AAB is omitted.
* **Section 49B Amendment:**
* References to Central Government are construed as references to Central Registrar or Registrar of Cooperative Societies.
* **Insertion of Section 53A (Exemption Powers):**
* Reserve Bank can exempt cooperative banks from certain provisions of the Act (specifically mentioned clauses and subsections) under specific conditions.
* **Repeal and Savings:**
* The Banking Regulation Amendment Ordinance, 2020 is repealed.
* Actions taken under the Ordinance are considered to have been taken under this Act.
Impact Analysis:
* **Cooperative Banks:**
* Impact: Subject to revised regulations regarding share issuance, capital management, and regulatory oversight by the Reserve Bank of India, with potential exemptions under Section 53A.
* Action Required: Understand and comply with the amended regulations, seek RBI approval for share issuance, and adhere to consultation processes with State Governments.
* **Reserve Bank of India:**
* Impact: Enhanced regulatory and supervisory powers over cooperative banks, including the authority to approve share issuances and grant exemptions.
* Action Required: Develop guidelines and procedures for implementing the new provisions, including share issuance approvals and exemption criteria.
* **Central/State Governments:**
* Impact: State Governments must be consulted by the RBI when issuing orders to cooperative banks registered with the Registrar of Cooperative Societies of a State. The Central government sees references to itself in section 49B be construed as references to Central Registrar or Registrar of Cooperative Societies.
* Action Required: Establish communication channels with the RBI for consultations and provide timely feedback on proposed orders.
* **Members/Depositors of Cooperative Banks:**
* Impact: Affected by changes in share capital regulations, potential restrictions on share surrender, and the overall financial health and stability of cooperative banks.
* Action Required: Stay informed about changes in cooperative bank regulations and their implications for their investments and deposits.
Key Entities Referenced
Banking Regulation Amendment Act, 2020: The title of the Act being analyzed, amending the Banking Regulation Act of 1949.
Banking Regulation Act, 1949: The principal Act which is being amended by the Banking Regulation Amendment Act, 2020.
Parliament: The legislative body that enacted the Banking Regulation Amendment Act, 2020.
Reserve Bank: The central bank of India, which is granted certain powers and responsibilities under the amended Banking Regulation Act.
Central Government: The executive branch of the Government of India, which has certain powers related to the commencement of the Act for specific cooperative banks.
National Bank for Agriculture and Rural Development Act, 1981: An Act that is referenced in relation to cooperative societies.
Companies Act, 1956: An Act that is referenced in relation to cooperative banks.
New Delhi: The location where the Ministry of Law and Justice is situated and the place of publication.
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MINISTRY OF LAW AND JUSTICE
(Legislative Department)
New Delhi, the 29th September, 2020/Asvina 7, 1942 (Saka)
The following Act of Parliament received the assent of the President on the
29th September, 2020 and is hereby published for general information:—
THE BANKING REGULATION (AMENDMENT) ACT, 2020
NO. 39 OF 2020
[29th September, 2020.]
An Act further to amend the Banking Regulation Act, 1949.
BE it enacted by Parliament in the Seventy-first Year of the Republic of India as
follows:—
1. (1) This Act may be called the Banking Regulation (Amendment) Act, 2020. Short title
and
(2) It shall be deemed to have come into force on the 26th day of June, 2020, except
commencement.
section 4, which, in so far as it relates to––
(i) primary co-operative banks, be deemed to have come into force on the 29th day
of June, 2020;
(ii) state co-operative banks and central co-operative banks, come into force on
such date as the Central Government may by notification in the Official Gazette, appoint:
Provided that different dates may be appointed for state co-operative banks and
central co-operative banks and any reference in any such provision to the2 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
commencement of this Act shall be construed as a reference to the coming into force of
that provision.
Substitution 2. In the Banking Regulation Act, 1949 (hereinafter referred to as the principal Act), for 10 of 1949.
of new section 3, the following section shall be substituted, namely:—
section for
section 3.
Act not to “3. Notwithstanding anything contained in the National Bank for Agriculture
apply to and Rural Development Act, 1981, this Act shall not apply to–– 61 of 1981.
certain co-
operative (a) a primary agricultural credit society; or
societies.
(b) a co-operative society whose primary object and principal business is
providing of long-term finance for agricultural development,
if such society does not use as part of its name, or in connection with its business, the
words “bank”, “banker” or “banking” and does not act as drawee of cheques.”.
Amendment 3. In section 45 of the principal Act,—
of section 45.
(i) in the marginal heading, for the word “reconstitution”, the word
“reconstruction” shall be substituted;
(ii) in sub-section (3), after the words “other creditors”, the words “or grant any
loans or advances or make investments in any credit instruments” shall be inserted;
(iii) in sub-section (4), after the words “During the period of moratorium”, the
words “or at any other time” shall be inserted;
(iv) in sub-section (5), in clauses (e), (i) and (j), for the words “date of the order
of moratorium”, the words “reconstruction or amalgamation” shall be substituted;
(v) in sub-section (6), in clause (a), for the word “amalgamation”, the words
“reconstruction or amalgamation” shall be substituted;
(vi) in sub-section (15), the words “or a subsidiary bank” shall be omitted.
Amendment 4. In section 56 of the principal Act,—
of section 56.
(A) in the opening portion, for the words “The provisions of this Act, as in force
for the time being,”, the words “Notwithstanding anything contained in any other law
for the time being in force, the provisions of this Act” shall be substituted;
(B) in clause (a), after sub-clause (ii), the following sub-clauses shall be inserted,
namely:—
‘(iii) references to “memorandum of association” or “articles of
association” shall be construed as references to bye-laws;
(iv) references to the provisions of the Companies Act, 1956, except in 1 of 1956.
Part III and Part IIIA, shall be construed as references to the corresponding
provisions, if any, of the law under which a co-operative bank is registered;
(v) references to “Registrar” or “Registrar of Companies” shall be construed
as references to “Central Registrar” or “Registrar of Co-operative Societies”, as
the case may be, under the law under which a co-operative bank is registered;’;
(C) clause (d) shall be omitted;
(D) in clause (e), sub-clauses (i) and (iii) shall be omitted;
(E) in clause (f), in section 7 as so substituted, in sub-section (2),—
(I) in clause (b), the words “or co-operative land mortgage banks” shall be
omitted;SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 3
(II) in clause (c), in sub-clause (ii), the words “or a co-operative land
mortgage bank” shall be omitted;
(F) clauses (fi), (fii) and (g) shall be omitted;
(G) for clause (i), the following clause shall be substituted, namely:—
‘(i) for section 12, the following section shall be substituted, namely:—
“12. (1) A co-operative bank may, with the prior approval of the Issue and
Reserve Bank, issue, by way of public issue or private placement,— regulation of
paid-up share
(i) equity shares or preference shares or special shares, on capital and
face value or at premium; and securities by
co-operative
(ii) unsecured debentures or bonds or other like securities banks.
with initial or original maturity of not less than ten years,
to any member of such co-operative bank or any other person residing
within its area of operation, subject to such conditions and ceiling, limit or
restriction on its issue or subscription or transfer, as may be specified by
the Reserve Bank in this behalf.
(2) Save as otherwise provided in this Act,—
(i) no person shall be entitled to demand payment towards
surrender of shares issued to him by a co-operative bank; and
(ii) a co-operative bank shall not withdraw or reduce its share
capital, except to the extent and subject to such conditions as the
Reserve Bank may specify in this behalf.”;’;
(H)clauses (l), (n) and (p) shall be omitted;
(I)in clause (q), sub-clauses (ii) and (iv) shall be omitted;
(J)clauses (r), (ria) and (sa) shall be omitted;
(K)in clause (t), sub-clause (i) shall be omitted;
(L)clauses (u), (v), (x), (y), (z) and (za) shall be omitted;
(M)in clause (zaa),—
(a) in section 36AAA as so inserted,—
(i) for the words “multi-State co-operative bank”, wherever they
occur, the words “co-operative bank” shall be substituted;
(ii) in sub-section (1), the following proviso shall be inserted,
namely:—
“Provided that in the case of a co-operative bank registered
with the Registrar of Co-operative Societies of a State, the Reserve
Bank shall issue such order in consultation with the concerned
State Government seeking its comments, if any, within such period
as the Reserve Bank may specify.”;
(iii) after sub-section (9), the following sub-section shall be inserted,
namely:—
“(10) The provisions of section 36ACA shall not apply to a
co-operative bank.”;
(b) section 36AAB as so inserted shall be omitted;
(N) for clause (zb), the following clause shall be substituted, namely:—
“(zb) Part IIC shall be omitted;”;4 THE GAZETTE OF INDIA EXTRAORDINARY [PART II— SEC. 1]
(O)in clause (zc), sub-clause (i) shall be omitted;
(P)clauses (zd) and (zf) shall be omitted;
(Q)for clause (zg), the following clause shall be substituted, namely:—
‘(zg) in section 49B, references to “Central Government” shall be construed
as references to “Central Registrar” or “Registrar of Co-operative Societies”, as
the case may be, under the law under which a co-operative bank is registered;’;
(R) clause (zh) shall be omitted;
(S) for clause (zj), the following clause shall be substituted, namely:—
‘(zj) after section 53, the following section shall be inserted, namely:—
Powers to “53A. Notwithstanding anything contained in any other provisions
exempt of this Act, the Reserve Bank may, from time to time, on being satisfied that
co-operative
it is necessary so to do, declare, by notification in the Official Gazette, that
banks in
the provisions of item (iii) of clause (b) of sub-section (1) and
certain cases.
sub-section (2), of section 10, clause (a) of sub-section (2) of section 10A,
sub-section (1A) of section 10B and clause (b) of sub-section (1) of
section 35B of this Act shall not apply to a co-operative bank or class of
co-operative banks, either generally or for such period as may be specified
therein, subject to such conditions, limitations or restrictions as it may
think fit to impose.”;’.
Repeal and 5. (1) The Banking Regulation (Amendment) Ordinance, 2020 is hereby repealed. Ord. 12 of
savings. 2020.
(2) Notwithstanding such repeal, anything done or any action taken under the Banking
Regulation Act, 1949, as amended by the said Ordinance, shall be deemed to have been done 10 of 1949.
or taken under the corresponding provisions of the said Act as amended by this Act.
————
DR. G. NARAYANA RAJU,
Secretary to the Govt. of India.
UPLOADED BY THE MANAGER, GOVERNMENT OF INDIA PRESS, MINTO ROAD, NEW DELHI–110002
AND PUBLISHED BY THE CONTROLLER OF PUBLICATIONS, DELHI–110054.
MGIPMRND—877GI—29-09-2020.