New Delhi: The Centre strengthened cooperative bank governance through amendments and regulatory safeguards introduced by RBI and NABARD, Minister of State for Finance Pankaj Chaudhary told Lok Sabha on March 23.
The measures aimed to improve transparency, accountability and depositor protection in cooperative banks. They included legal changes, supervisory frameworks and financial safety mechanisms.
The government amended the Banking Regulation Act to cap the tenure of board directors at 10 consecutive years, excluding chairpersons and whole-time directors. This step aimed to prevent prolonged control and improve governance standards.
It also amended the Multi-State Cooperative Societies Act, 2002, to introduce a Cooperative Ombudsman. The ombudsman will handle complaints from members regarding deposits, benefits and individual rights. In addition, authorities set up a Cooperative Election Authority to ensure free and fair elections in multi-state cooperative societies.
RBI issued Master Directions on Fraud Management in 2024. These guidelines covered fraud reporting, accountability and early warning systems. They also defined roles for auditors and third parties to strengthen oversight.
Cooperative bank governance backed by financial safeguards
RBI implemented the Prompt Corrective Action framework for cooperative banks. This framework required weak banks to take timely corrective steps to restore financial health and protect depositors.
NABARD introduced the Turn Around Plan for State Cooperative Banks and District Central Cooperative Banks. The plan focused on reducing losses, improving financial performance and strengthening internal systems. It also promoted technology adoption, cost control and financial inclusion.
RBI provided a financial safety net through deposit insurance under DICGC. Deposits up to ₹5 lakh per depositor, including interest, remained insured in cooperative banks. Additionally, RBI issued guidelines for Risk-Based Internal Audit systems in urban cooperative banks.
The minister said these combined steps reinforced cooperative bank governance and aimed to ensure stability and trust in the sector.
