July 18, 2021 2:25:13 am
In a surprise move just ahead of the Monsoon Session of Parliament, during which the Opposition plans to corner the government on multiple issues, NCP chief Sharad Pawar on Saturday met Prime Minister Narendra Modi and discussed issues of “national interest”.
Stating that no political meaning should be read into the meeting, the NCP pointed out that Pawar has flagged some “inconsistencies” in the banking regulation amendment Act in the context of cooperatives. The party said its coalition partners in Maharashtra government — Congress and Shiv Sena — were told in advance about the meeting.
The Bill amending the banking regulation (BR) Act — to bring cooperative banks under the supervision of RBI — was passed by Parliament last year.
Saturday’s meeting came days after the Centre created a new Ministry of Cooperation, a move being viewed with suspicion by many parties in Maharashtra, including NCP.
The meeting immediately triggered interest in political circles, given that Pawar had been at the centre of political moves in the last few days. Last month, the NCP chief had hosted a meeting of leaders of eight opposition parties and some eminent personalities at his residence. The Congress was missing at that meeting.
He has also met poll strategist Prashant Kishor thrice in the last one month, leading to many political speculations.
Moreover, there is fresh tension in the Maha Vikas Aghadi (MVA) coalition in Maharashtra over some of the utterances of state Congress president Nana Patole. Pawar as well as Maharashtra Chief Minister Uddav Thackeray were said to be irked by Patole’s repeated assertions that his party will contest the 2024 Assembly elections independently.
NCP state president Jayant Patil said Pawar’s meeting with Modi was confined to the cooperative sector. “He had received a lot of complaints from across states on the adverse impact of changes in the BR Act on the cooperative sector. As per the scheduled appointment he discussed the issue with Modi. There was nothing political. The Congress and Shiv Sena leaders were well apprised about the meeting and subject,” he said.
Hours after the meeting, Pawar tweeted a letter he had written to Modi, pointing out certain “inconsistencies” in BR Act. Pawar said he discussed with Modi various issues of national interest and through the letter drew his attention to “issues and conflicts in the wake of certain developments in the cooperative banking sector.”
He stated: “Although the objects and reasons for amending the Act can be lauded, I wish to point out certain inconsistencies and the resulting legal inefficacy of normative provisions of the Act that are in conflict most specifically with the 97th Constitutional Amendment, State Cooperative Societies Acts and with the Cooperative Principles.
“I reiterated in the letter that the aims and objectives of the Amended Act are well-intentioned, and many provisions are necessary. Erring Board and Management must definitely be acted upon strictly and the depositors’ interests should be protected, but at the same time it should be ensured that while doing so, the Cooperative Principles laid down in the Constitution are not sacrificed at the altar of over-zealous regulation,” he said.
In his letter, Pawar wrote that the amended Act “deals with matters pertaining to ‘incorporation, regulation and winding up’ in addition to matters relating to ‘Banking’, which are exclusive domain for state legislation. Therefore, I reiterate the fact that various impugned sections that have been introduced to amend section 56 of the Banking Regulation Act are beyond the legislative competence of Parliament and therefore void under Article 123(3) of the Constitution.”
Pawar said some of the changes in the Act were detrimental to growth of the cooperative sector and violated its autonomy. “The regulator (RBI) has been bestowed with such wide administrative powers which may interfere with the day to day working of a cooperative bank and violate the cooperative principle — autonomy and independence.”
The prescription of “fit and proper” criteria applied by RBI takes away the democratic right of an elected member to be a constituent of the Board, he stated.
“I regret to state that though this criteria is presently applicable to public and private sector banks, there have been maximum cases of mismanagement, fraud and wrongdoings”, so “I emphasize here in governance as the core issue be it public, private or cooperative sector,” Pawar wrote.
Drawing attention to the conflict of provisions, Pawar stated, “The powers bestowed on the Reserve Bank to deal with matter pertaining or disqualification of directors, constitution of boards of management , appointment of CEOs, audit obligations etc can be construed as excessive regulations. The amended Act overrules various provisions of the Cooperative Act in regard to the formation of the Board and Election of Chairman, appointment of Managing Director etc by holding a caveat in terms of such appointment.”
Another concern raised by Pawar related to issuance of share capital.
The amended Act allows cooperative banks to issue — with prior approval from RBI — equity, preference or special shares at face value or at a premium by way of public issue or private placement. However, cooperative banks are set up on the principles of member control, with equity shares issued to members. Since cooperative societies raise capital from members, it is unclear what it means to raise equity capital from public and how it will be treated or regulated, he wondered.
According to Pawar, “Issuance of equity shares will violate the principles of cooperative if they carry proportional voting rights.” Cooperative societies grant voting rights to only members based on one-member-one-vote principle, irrespective of share-holding.
Referring to the appointments of auditors, Pawar stated, “The 97th Constitution Amendment, which is over and above all Acts, has given power to general body to appoint statutory auditors, while under amended BR Act, RBI’s approval is required for statutory auditors.” While the state cooperative Act says audit should completed within six months, the amended BR Act mandates completion within three months, he noted.
The NCP leader took strong objection to provisions made in the Act for removal of CEOs and superseding the board of cooperative banks.
Under the state Act, the power lies with the board of directors to remove a CEO. Now, after the amendments, RBI’s approval will be required.
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