What changed
RBI issued a new Master Circular replacing the July 2, 2007 version, consolidating all instructions on investments by Primary Urban Co-operative Banks up to June 30, 2008. The circular updates and integrates previous guidelines on shareholding restrictions, statutory investments, broker engagement, and valuation norms.
What it means for you
Urban co-operative banks must now follow a single, updated reference document for all investment-related compliance, reducing ambiguity. The caps on shareholding in other co-operative societies (2% of owned funds overall, 5% per society) remain unchanged, ensuring continued risk containment. Banks need to align their investment policies and reporting with this consolidated circular.
What you must do
- Review and update your bank's investment policy to align with the consolidated Master Circular.
- Ensure total investments in shares of other co-operative societies (excluding exempt categories) do not exceed 2% of owned funds.
- Verify that investment in any single co-operative society does not exceed 5% of its subscribed capital, and monitor aggregate contributions from all co-operative banks.
- Check that share capital contributions to societies under para 1.2.1 include provisions for retirement in 10 equal annual installments.
- Update internal controls and reporting systems to comply with the circular's SLR, non-SLR, and valuation requirements.
Who it affects
Primary (Urban) Co-operative Banks, Chief Executive Officers of Urban Co-operative Banks, Compliance and investment departments of Urban Co-operative Banks
What is the limit on holding shares in other co-operative societies?
Total investments in shares of other co-operative societies (excluding those exempted under Section 19) must not exceed 2% of the bank's owned funds. Additionally, investment in any single society is capped at 5% of that society's subscribed capital.
Does this circular change any existing investment rules?
No, it consolidates all existing instructions up to June 30, 2008, into one document. The rules on shareholding limits, SLR, non-SLR, and broker engagement remain the same as before.
What are the exempt categories for shareholding in co-operative societies?
Shares acquired through state government funds, central co-op bank holdings in state co-op banks, and primary urban co-op bank holdings in affiliated central or state co-op banks are exempt from the 2% limit.