In the architecture of Indian banking regulation, what specific supervisory mechanism does the Reserve Bank of India employ to monitor cooperative banks operating under state legislation in regions like Arunachal Pradesh?

💡 Solution & Explanation

Cooperative banks in India, including state and district cooperative banks in Arunachal Pradesh, operate under a dual regulatory framework where matters related to incorporation, management, and audit fall under the State Cooperative Societies Act, while banking operations, capital adequacy, and statutory reserves are regulated by the Reserve Bank of India under the Banking Regulation Act, 1949. Amendments over the years have further strengthened the Reserve Bank of India supervisory powers over cooperative banks to protect depositor interests. Maintaining adequate capital-to-risk-weighted assets ratio remains a key regulatory requirement for these institutions.