The cooperative banks would now come under the umbrella of the Reserve Bank of India after the Banking Regulation (Amendment) Bill 2020 was passed in the Rajya Sabha on Tuesday.
Union Finance Minister Nirmala Sitharaman, while answering questions on the bill, said many of these banks had faced crisis amid the Covid-19 pandemic.
The RBI is now monitoring their finances and losses, she added.
The banks will now be monitored by the central bank like the other scheduled banks. The RBI's intervention will extend protection to depositors and ensure less scope for mismanagement, says a report.
The bill was passed in the Lok Sabha on September 16.
The central government, earlier, had brought in an ordinance in June to amend the law which was signed by President of India Ram Nath Kovind on June 26. The bill will now replace the ordinance.
The amendments to Banking Regulation Act, 1949 does not affect existing powers of the State Registrars of Co-operative Societies under state co-operative laws. It will also not apply to Primary Agricultural Credit Societies (PACS) or co-operative societies whose principal business is long-term finance for agricultural development, and which do not use the word "bank" or "banker" or "banking" and do not act as drawees of cheques.
The country has various types of co-operative banks such as urban co-operative banks (UCBs) and rural co-operative banks (RCBs); and RCBs are further classified into state co-operative banks (StCBs) and district central co-operative banks (DCCBs).