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Explained: Why is the NCP

opposing RBI supervision of
cooperative banks?
The changes to The Banking Regulation Act approved by Parliament in
September 2020, brought cooperative banks under the direct supervision
of the RBI. Why is the NCP opposing the new laws?
Written by Khushboo Narayan , Edited by Explained Desk
Mumbai | June 4, 2021 08:39 IST

During a meeting with his party on Wednesday (June 2), NCP chief Sharad Pawar approved a
plan to set up a task force to prepare an action plan against a recent change in the law that has
brought cooperative banks under the supervision of the Reserve Bank of India (RBI).
Balasaheb Patil, NCP leader and Cooperation Minister in the current Maha Vikas Aghadi
government will be heading the task force. Other than Patil, nominees of Congress and Shiv
Sena and experts in the field of banking will be members of the task force too.

NCP spokesperson Nawab Malik said the Centre was trying to weaken the cooperative banking
sector through changes to The Banking Regulation Act, 1949, and the NCP would stop its
“game”.

Reported extensively by TFI, most cooperative banks and societies in Maharashtra are directly
controlled by the NCP and fearing the power slipping from its hands, NCP is making last-ditch
attempts to restore the parity. NCP politicians are involved in the management of cooperative
banks, and it is partly the reason why every year, news of fraud worth thousands of crores used
to be unearthed from such banks. In Maharashtra, NCP, which was in power for years, had put
a state guarantee on loans given by these banks. This means the local politicians who controlled
the management of these banks would get loans worth crores from these banks and in absence
of any real authority, would more often than not default on the payback.

The Fadnavis government ended the state guarantee on the loans provided by UCBs, but when
the tri-party alliance came to power, it was again enacted, possibly at the behest of NCP. So
far, these banks were under dual authority with the power to appoint or change the management
with the board and other regulatory functions lying with RBI. After the government order,
1,482 urban cooperative banks and 58 multi-state cooperative banks came under the direct
supervision of RBI.
The Pawar family is the best example of how politicians use public offices to reap economic
dividends. Sharad Pawar built the political and business empire by influencing agriculture and
related industries through policy manipulation. The cooperative banks, sugar mills, agriculture
market produce committee (APMC) were the instruments for Sharad Pawar to build the power
base of the politics of the state.

With the complete control of banks getting in hands of RBI, the politicians fear losing out on
easy money that these banks churned for them on a consistent basis and this may be the reason
that Pawar is assembling his team to put up a frontier, albeit a failed one.