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New RBI guidelines on urban co-operative banks
March 21, 2022
Primary Cooperative Banks, popularly known as Urban Cooperative Banks (UCBs) are co-operative societies registered under provisions of the individual State Cooperative Societies Act or Multi-state Cooperative Societies Act, 2002. UCBs are supervised under the Registrar of Cooperative Societies.
However, the ability to issue banking licenses and regulate, supervise and develop banking functions of UCBs are vested with the RBI by virtue of the Banking Regulation (BR) Act, 1949.
Considering the BR Amendment Act of 2020, the new fundraising norm was proposed and public comments on the draft were welcomed by RBI last year in 2021. The 2020 amendment substituted Section 12 to accommodate the issue and regulation of securities by co-operative banks.
The 2022 notification specifies that UCBs can raise capital through three broad methods, viz, issuance of equity shares, preference shares, and debt instruments.
In the first place, UCBs can raise funds by issue of equity to selected individuals within the area of operation or through additional equity shares to existing members.
Second, UCBs can expand Tier – I and Tier – II capital by giving Perpetual Cumulative and Non-Cumulative Preference Shares, and, Redeemable Cumulative and Non-Cumulative Preference Shares.
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