RBI Central Board Director Satish Marathe has asked the government to give full powers to the Reserve Bank of India to regulate all urban cooperative banks in the wake of depositors facing hardship in withdrawing their entire sum from the scam-hit Punjab and Maharashtra Cooperative (PMC) Bank.

In a letter to Finance Minister Nirmala Sitharaman, Mr. Marathe also suggested that a broad-based committee should be set up to prepare a vision document and a road map for the cooperative banking sector. He also said the committee should constitute officials from the Reserve Bank of India (RBI), Finance Ministry, Agriculture Ministry, and at least two eminent co-operators.

Mr. Marathe also raised these issues during his recent meeting with Ms. Sitharaman.

“Amend the Banking Regulation Act to provide full regulatory powers to the RBI to regulate all urban co-op banks viz. all scheduled and non-scheduled, irrespective of their being registered under respective State co-op Act or the multi-State co-op societies Act,” said his letter to the Minister.

He added that simply amending the Multi-State Cooperative Societies Act will not be enough.

On Friday, Ms. Sitharaman told reporters that the government would bring a legislation to effectively regulate cooperative banks so that they also follow prudential norms applicable for commercial banks.

He further said the government should find an “out of the box” solution to redress the hardships being faced by all categories of depositors and the cooperative sector.

He also said once the fraud at PMC Bank was noticed, the RBI, the Finance Ministry and the Economic Offences Wing (EOW) of the Maharashtra police swiftly initiated action to protect the interests of the depositors.

PMC, which is among the top 10 urban cooperative banks, was placed under an RBI-appointed administrator on September 23 for six months, due to massive under-reporting of dud loans.

The bank, over a long period of time, had given over ?6,500 crore in loans to HDIL, which is 73% of its total advances, and which has turned sour with a shift in the fortunes of the now-bankrupt company.

Its total loans stand at ?8,880 crore and the deposits at over ?11,610 crore. There have been massive protests across city from the depositors following the RBI action.

The scam has affected lakhs of customers who are facing difficulties in withdrawing their entire money due to restrictions imposed by the RBI.