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 you must do
- 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
What types of property can UCBs acquire under this directive?
UCBs can only acquire property that is meant for their own identifiable and justifiable use, such as bank premises or office space. Property for investment or non-operational purposes is not allowed.
What is the deadline for disposing of non-banking assets acquired in satisfaction of claims?
The directive refers to the period stipulated under Section 9 of the Banking Regulation Act, 1949 (AACS). UCBs must ensure disposal within that legal timeframe, though the exact period is not specified in this circular.