RBI Bars UCBs from Acquiring Non-Use Property

What changed

RBI issued a directive under Section 6 of the Banking Regulation Act, 1949 (as applicable to co-operative societies), clarifying that UCBs cannot acquire property not meant for their own justifiable use. It also reiterated the existing requirement to dispose of non-banking assets acquired in satisfaction of claims within the stipulated period under Section 9 of the Act.

What it means for you

UCBs must now strictly avoid purchasing property for non-operational purposes, limiting acquisitions to assets needed for their own business. Any property taken over to recover dues must be sold off within the legal timeframe, preventing long-term holding of non-banking assets. This tightens compliance and reduces risk of asset-liability mismatches.

What banks were required to do at the time

• Review all property acquisitions to ensure they are for identifiable and justifiable bank use only.
• Set up a monitoring system to track non-banking assets acquired in satisfaction of claims and ensure timely disposal within Section 9 timelines.
• Update internal policies and train staff on these restrictions to avoid regulatory breaches.
• Conduct an audit of existing non-banking assets to confirm compliance with disposal deadlines.

Who it affects

All Primary (Urban) Co-operative Banks, UCB compliance and risk management teams, UCB board and senior management