The Union Cabinet on Wednesday approved amendments to the Banking Regulation Act to bring multi-state cooperative banks under the central bank’s regulation to prevent malpractices and ensure better regulation.

“Currently, there are 1,540 cooperative banks with 8.6 crore depositors’ money, with Rs 5 lakh crore deposits. After the amendment, such banks will come under RBI’s (Reserve Bank of India) regulation,” Information and Broadcasting Minister Prakash Javadekar said, adding that the administrative role will be managed by the cooperative registrars.

Such banks will also be audited as per RBI norms, the minister said after the Cabinet meeting. The amendments follow the collapse of Punjab and Maharashtra Co-operative (PMC) Bank last year. Following the amendments, the recruitment for the banks’ management will be based on certain qualifications and appointment of the chief executive officer will also require prior permission.

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Separately, the Union Budget for 2020-21 has proposed increasing the limit of insurance cover in case of bank failure on deposits to Rs 5 lakh from Rs 1 lakh.