UPSC Prelims 2021 – Question 55

by Edukemy Team February 27, 2024

Here is Question No. 55 a part of our series on UPSC Prelims 2021.

Table of Contents

They are supervised and regulated by local boards set up by state governments
They can issue equity shares and preference shares.
They were brought under the purview of the Banking Regulation Act, of 1949 through an Amendment in 1966.

Which of the statements given above is/are correct?
a) 1 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3

Answer – B

Statement 1 is not correct: The recent Banking Regulation (Amendment) Act 2020 enables the RBI to get all the powers, including those hitherto exclusively with the registrar of the cooperative societies. However, the powers of the registrar continue to be with him but the powers of RBI override those of the registrar.
Statement 2 is correct: UCBs are permitted to raise equity share capital, preference shares, and debt instruments. The UCBs, it said, could raise share capital by issuing equity to persons within their area of operation enrolled as members and also through additional equity shares to the existing members.
Statement 3 is correct: The applicability of banking laws to cooperative societies since March 1, 1966, ushered in a ‘duality of control’ over UCBs between the Registrar of Cooperative Societies/Central Registrar of Cooperative Societies and the Reserve Bank of India. Banking-related functions (viz. licensing, area of operations, interest rates, etc.) were to be governed by RBI and registration, management, audit and liquidation, etc. governed by State Governments as per the provisions of respective State Acts. So the control of the RBI was partial and it shared the control with the registrar of cooperative societies of States, giving rise to the much-discussed dual control and the difficulties it posed to the central bank.

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