What changed
This is an annual consolidation of all investment-related instructions issued up to June 30, 2011, replacing the July 1, 2010 master circular. No new policy changes were introduced; it merely updates and compiles existing guidelines into a single reference document.
What it means for you
Urban co-operative banks must continue to adhere to the existing investment framework, including the 2% of owned funds limit for shares in other co-operative societies and the 5% per-society cap. The circular ensures all instructions are current and easily accessible for compliance. Banks should review their investment portfolios against this consolidated circular to ensure alignment with RBI requirements.
What you must do
- Review your bank's investment policy to ensure compliance with the updated master circular, especially the shareholding limits in other co-operative societies.
- Verify that total investments in shares of co-operative institutions (excluding exempt categories) do not exceed 2% of owned funds.
- Ensure that investment in any single co-operative society does not exceed 5% of that society's subscribed capital.
- Update internal documentation and training materials to reference the July 1, 2011 master circular as the current governing document.
- Monitor any subsequent RBI circulars for further changes to investment guidelines.
Who it affects
Primary (Urban) Co-operative Banks, Chief Executive Officers of Urban Co-operative Banks, Compliance and investment departments of UCBs
What is the limit on holding shares in other co-operative societies?
Total investments in shares of co-operative institutions (excluding those exempted under Section 19 of the BR Act) must not exceed 2% of the bank's owned funds. Additionally, investment in any single co-operative society cannot exceed 5% of that society's subscribed capital.
Does this circular introduce any new investment rules?
No, this is a consolidation of existing instructions issued up to June 30, 2011. It updates the previous master circular from July 1, 2010, but does not introduce new policy changes.
Which investments are exempt from the 2% limit on shares in co-operative societies?
Shares acquired through state government funds, shares held by a central co-operative bank in its affiliated state co-operative bank, and shares held by a primary urban co-operative bank in its affiliated central co-operative bank or state co-operative bank are exempt.