Lok Sabha Question No. 5003 (UNSTARRED), answered on 2026-03-23
Subject: Safeguards for Cooperative Banks
Ministry: FINANCE
Asked by: Smt. Pratima Mondal

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO. 5003

## ANSWERED ON MONDAY, 23 MARCH, 2026/ 02 CHAITRA, 1947 (SAKA)

## Safeguards for Cooperative Banks

## 5003. SMT. PRATIMA MONDAL:

Will the Minister of FINANCE be pleased to state:

(a)  whether  the  Government  has  any  mechanism  in  place  to  safeguard  and  ensure  that cooperative  banks  are  insulated  from  political  interference  and  function  with  financial transparency; and

(b) if so, the details thereof?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a) and (b): The regulatory and supervisory framework of Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) ensures that cooperative banks  are  insulated  from  political  interference  and  function  with  financial  transparency. Several measures have been taken in this regard, which inter-alia include:

- In  order  to  ensure  transparency  and  protect  depositors'  interests,  the  Banking Regulation Act has been amended by the Government to make the term of Board of Directors of Cooperative Banks (excluding Chairperson and Whole time directors) as maximum 10 consecutive years.
- The  Multi-State  Cooperative  Societies  (MSCS)  Act,  2002,  has  been  amended  to include the provision of appointment of Cooperative Ombudsman which deals with complaints or appeals from members of the MSCS regarding their deposits, equitable benefits  of  the  Multi-State  Co-operative  Society's  functioning  or  any  other  issue affecting the individual rights of the concerned members.
- The  Cooperative  Election  Authority  has  been  set  up  to  strengthen  governance  and accountability,  with  a  mandate  to  conduct  free  and  fair  election  in  all  Multi-State Cooperative Societies.
- Master Direction on Fraud Management for the Cooperative Banks have been issued in 2024  by  RBI  &  contain  comprehensive  guidelines  related  to  reporting  of  fraud, following of principles of natural justice, governance mechanism, implementation of early warning mechanism, staff accountability, fixation of responsibility of third parties and role of external and internal auditors, among others.
- RBI's Prompt Corrective Action (PCA) Framework requires the identified cooperative banks to initiate and implement remedial measures in a timely manner, to restore their financial health and protect the interests of the depositors.
- NABARD has implemented the Turn Around Plan (TAP) to improve the financial performance and prevent/reduce losses in State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs). TAP aims to reduce financial losses and improve the overall health of these cooperative banks by adopting a comprehensive approach

which inter-alia includes  review  and  monitoring  of  financial  parameters,  business diversification, internal checks and controls, governance, cost rationalization, human resource development, technology adoption, financial inclusion, etc.

- RBI has implemented a financial safety net for the account holders of banks (including cooperative banks) in the form of Deposit Insurance through DICGC, wherein various types of deposits (inclusive of principal & interest) up to ₹5,00,000 per depositor are insured in cooperative banks.
- RBI  has  issued  guidelines  for  Risk  Based  Internal  Audit  (RBIA)  system  in  Urban Cooperative Banks.

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