What changed
RBI issued a clarification on October 20, 2005, adding a new restriction to the existing framework on donations by UCBs. Banks that have accumulated losses in their balance sheet are now explicitly ineligible to make any donations or contributions for public or charitable purposes. All other terms and conditions from the earlier circular dated April 11, 2005 continue to apply.
What it means for you
UCBs must first clear all accumulated losses before they can consider making any donations from profits. This prevents banks with weak financial health from diverting funds to charitable causes, ensuring capital is preserved for recovery and regulatory compliance. Lenders should review their balance sheets and ensure no donations are made while losses remain outstanding.
What you must do
- Check your bank's latest balance sheet for any accumulated losses before approving any donation or contribution.
- If accumulated losses exist, immediately halt all planned donations and contributions for public/charitable purposes.
- Update internal policies and approval checklists to include this eligibility condition for donations.
- Acknowledge receipt of this circular to your concerned Regional Office of RBI.
Who it affects
All Primary (Urban) Co-operative Banks, Board of Directors and management of UCBs, Compliance and finance teams of UCBs
Can a UCB with accumulated losses make any donation at all?
No. RBI has clarified that banks with accumulated losses in their balance sheet are not eligible to make any donations or contributions for public or charitable purposes.
Does this circular replace the earlier April 2005 circular on donations?
No. It only adds a new condition. All other terms and conditions from the April 11, 2005 circular remain in force.
What should we do if we have already approved a donation but have accumulated losses?
You should immediately halt the donation and review your balance sheet. Ensure compliance with this circular before proceeding with any payment.