Home › Circulars › RBI/2013-14/205

UCBs Banned from Donating to Director-Linked Trusts

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2013-14/205 · issued 30 Aug 2013 · ~2 min read

Quick answerRBI prohibits Urban Co-operative Banks from making donations to trusts where directors or their relatives hold positions or are interested, even within the earlier 1% profit ceiling. This immediate ban targets conflicts of interest.

What changed

Earlier, UCBs could donate up to 1% of previous year's published profits to trusts, including those involving directors. Now, any donation to a trust where a director or relative holds a position or is interested is completely prohibited, regardless of the profit ceiling.

What it means for you

UCBs must immediately stop all donations to trusts where directors or their relatives are trustees, beneficiaries, or involved in any capacity. This tightens conflict-of-interest rules and ensures bank funds are not used for personal benefit. Banks need to review their donation policies and identify any such trusts to avoid non-compliance.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Immediately cease all donations to trusts where directors or their relatives hold positions or are interested.
Review existing donation commitments and identify any trusts falling under the prohibited category.
Update internal policies and board-approved donation guidelines to reflect this absolute prohibition.
Ensure compliance teams verify the status of all recipient trusts before any future donations.

Who it affects

All Primary (Urban) Co-operative Banks, Board of Directors of UCBs, Compliance and audit teams of UCBs

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-18 13:15 IST
Status change: withdrawn 03 Aug 2026, 04:00 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Does this ban apply even if the donation is within the 1% profit ceiling?

Yes, the circular explicitly states that donations to director-linked trusts are prohibited even within the permissible ceiling of 1% of published profits.

What is considered 'interest' in a trust under this circular?

A director or relative is considered to have an interest if they hold a position as trustee, are beneficiaries, or are involved in any capacity that could influence their independence.

Who qualifies as a 'relative' of a director?

Relatives include spouse, parents, children, siblings, and their spouses, as well as members of a Hindu Undivided Family, as defined in the circular's annex.

📜 Read the original circular — full text as issued by RBI

RBI/2013-14/205
 UBD.BPD.(PCB).Cir. No. 7/09.72.000//2013-14
 August 30, 2013
 The Chief Executive Officer
 All Primary (Urban) Co-operative Banks
 Dear Sir/Madam,
 Donations to Trusts and Institutions where 
 Directors, their relatives hold position or are interested 
 Please refer to our Circular UBD (PCB)/BPD/Cir.43/09.72.00/2004-05 dated April 11, 2005 , in terms of which Urban Co-operative Banks (UCBs) were advised that the normal donations to be made during a year should be restricted to a ceiling of 1% of the published profits of the bank for the previous year and such normal donations, together with those that may be made to National Funds and other funds recognized /sponsored by the Central /State Government, during a year, should not exceed 2% of the published profits of the bank for the previous year.
 2. It has been brought to our notice that some of the UCBs have made contributions which are in the nature of donations to the Trusts for charitable or benevolent objective or for any exhibition in which the directors or relatives are interested. In view of this, UCBs are, with immediate effect, prohibited from giving donations to Trusts and Institutions, where directors, and/or their relatives hold position or are interested, even within the permissible ceiling of 1% of the published profits of the bank for the previous year.
 3. The terms 'relative' and “interest, as used above, shall have the meaning as indicated in the Annex .
 Yours faithfully,
 (A.K. Bera)
 Principal Chief General Manager
 Encl: Annex 
 Annex
 Definition of terms "relative" and “interest”
 1. “relative”
 The ‘relative’ of a director of the bank shall mean any relative of a director of the bank as indicated hereunder:
 A person shall be deemed to be relative of another, if and only if, :-
 a) they are members of a Hindu Undivided Family; or
 b) they are husband and wife; or
 c) the one is related to the other in the manner indicated below :
 List of relatives
 1. Father
 2. Mother (including step-mother)
 3. Son (including step-son)
 4. Son's wife
 5. Daughter (including step-daughter)
 6. Daughter's husband.
 7. Brother (including step-brother)
 8. Brother’s wife
 9. Sister (including step-sister)
 10. Sister’s husband
 2. "interest"
 Trust in which directors /relatives of directors hold positions as Trustees, or are beneficiaries or involved in any capacity in the working of the trust, which is likely to influence the independence of the director(s).

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/205 · issued 30 Aug 2013. The plain-English explanation above is BankPulse’s own independent summary.

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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8351&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.