Ordinance bringing co-op banks under RBI challenged

When the plea moved by Big Kanchipuram Town Bank Ltd and the Velur Cooperative Urban Bank Ltd came up for hearing, the first bench comprising Chief Justice AP Sahi and Justice Senthilkumar Ramamoorthy posted it to July 20 for passing interim orders.

The banks had sought to stay the operation of the ordinance till the final disposal of the petitions.

Appearing for the banks, senior counsel PH Arvindh Pandian submitted that the ordinance dealt with matters that were within the exclusive domain of the State List and List II of Schedule VII of the Constitution over which the Parliament has no legislative competence.

But senior counsel AL Somayaji who appeared for the RBI contended that it would be a State subject only when a cooperative society does activities other than banking. The moment it indulges in banking activities, it falls under the purview of the Parliament.

The ordinance has been passed only to bring the banks under the banking regulations and protect the interest of the public, he added.

Additional Solicitor General R Sankaranarayanan added that when such societies exclusively do banking activity, they fall within the purview of Parliament.

However, while adjourning the case, the bench remarked as to why RBI had granted licences to societies to engage in banking activity if it felt that public interest was not protected by such cooperative banks.