Home › Circulars › RBI/2013-14/530

UCBs Can Now Issue Long Term Deposits to Non-Members for Tier II Capital

Current · Source: Reserve Bank of India · RBI/2013-14/530 · issued 25 Mar 2014 · ~2 min read
Quick answerRBI now allows Primary Urban Co-operative Banks to issue Long Term Deposits (LTDs) to non-members, including those outside their area of operation, subject to approvals. These LTDs, meeting specified terms, qualify as lower Tier II capital, easing capital augmentation.
The rule, in the simplest words
How it plays out — a real example

A co-operative bank branch officer in Indore at a Primary Urban Co-operative Bank is reviewing a new policy. She sees that now she can accept a 5-year fixed deposit from a local shopkeeper who is not a member of the bank, even though the shop is outside the bank's usual area. She checks that the bank has the required approvals from the RBI and the Registrar, and then she issues the deposit, knowing it will help strengthen the bank's capital base.

What changed

RBI modified para 1 of Annex II of its July 15, 2008 circular on capital instruments for UCBs. Previously, LTD issuance was restricted; now UCBs can issue LTDs to both members and non-members, including those outside their operational area. The change requires compliance with bye-laws, cooperative society acts, and approvals from RBI and the relevant Registrar of Cooperative Societies.

What it means for you

This modification gives UCBs a broader base to raise long-term funds for capital adequacy, as LTDs can now be sourced from non-members and external areas. It enhances flexibility in augmenting lower Tier II capital, which can strengthen the capital base without diluting ownership. Banks must ensure strict adherence to regulatory and statutory approvals to qualify for Tier II treatment.

What you must do

Who it affects

Primary (Urban) Co-operative Banks, UCB treasuries and capital planning teams, Registrars of Cooperative Societies, RBI's Urban Banks Department

❓ Common questions

Can UCBs issue LTDs to anyone now?

Yes, UCBs can issue LTDs to both members and non-members, including those outside the bank's area of operation, subject to compliance with bye-laws, cooperative acts, and approvals from RBI and the Registrar.

Will all LTDs automatically count as Tier II capital?

No, only LTDs that meet the terms and conditions outlined in the July 15, 2008 circular will be eligible for treatment as lower Tier II capital. Banks must ensure full compliance.

Do we need fresh RBI approval for each LTD issuance?

The circular states that LTD issuance requires approval from RBI and the concerned Registrar. Banks should seek specific guidance from RBI on whether a one-time or per-issuance approval is needed.

📜 Read the original circular — full text as issued by RBI
RBI/2013-14/530 UBD CO BPD PCB Cir No.51/09.18.201/2013-14 March 25, 2014 The Chief Executive Officers of All Primary (Urban) Co-operative Banks Dear Sir / Madam, Instruments for Augmenting Capital Funds-UCBs - Modification Please refer to our circular UBD PCB Cir.No.4/09.18.201/2008-09 dated July 15, 2008 on the captioned subject. 2. It has been decided to modify para 1 of the Annex II to the said circular as under: “UCBs may issue Long Term Deposits subject to compliance with their bye-laws/provisions of the Co-operative Societies Acts under which they are registered and with the approval of the Reserve Bank of India and the concerned Registrar of Co-operative Societies /Central Registrar of Cooperative Societies, whichever applicable. LTDs may be issued to members and non-members, including those outside the area of operation of the UCB concerned. The amounts raised through LTDs complying with the following terms and conditions will be eligible to be treated as lower Tier II capital”. 3. Other provisions of the circular dated July 15, 2008 remain unchanged. Yours faithfully, (A.K. Bera) Principal Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/530 · issued 25 Mar 2014. The plain-English explanation above is BankPulse’s own independent summary.
🧰 Tools — save, print, templates & related
Most relevant forCompliance TeamTreasury Team / ALMSenior Management / BoardProduct Manager (Digital & Lending)Branch Manager — PSU / Co-op / RRB (sanctioning powers)Internal Audit
🛠 Banker’s toolkit — checklists & reply templates →
Related circulars · Department of Regulation
SFB Pillar 3 Disclosure Norms Aligned with BaselUCB Deposit Rate Disclosure & Uniformity Rules UpdatedLAB Deposit Rate Disclosure & Uniformity Rules TightenedPayments Banks: Interest Rates Must Match Disclosed ScheduleRBI Updates Bulk Deposit Rate Rules and Disclosure Timing
Browse all departments →
Who does what — compliance checklist
💻 IT / Systems
  • Ensure LTD terms comply with the conditions specified in the July 15, 2008 circular for eligibility as lower Tier II capital.
📜 Compliance
  • Review and update your UCB's policy on Long Term Deposits to include issuance to non-members and outside area of operation.
  • Obtain necessary approvals from RBI and the concerned Registrar of Cooperative Societies before issuing LTDs.
  • Train staff on the revised eligibility criteria and documentation for LTDs to avoid compliance gaps.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (Primary (Urban) Co-operative Banks, UCB treasuries and capital planning teams, Registrars of Cooperative Societies, RBI's Urban Banks Department), your first concrete step on “UCBs Can Now Issue Long Term Deposits to Non-Members for Tier II Capital” is: “Review and update your UCB's policy on Long Term Deposits to include issuance to non-members and outside area of operation.” (RBI issued this 25 Mar 2014).

  1. Circular: RBI/2013-14/530 -- UCBs Can Now Issue Long Term Deposits to Non-Members for Tier II Capital
  2. Issued: 25 Mar 2014
  3. Action required: Review and update your UCB's policy on Long Term Deposits to include issuance to non-members and outside area of operation.
  4. Action required: Obtain necessary approvals from RBI and the concerned Registrar of Cooperative Societies before issuing LTDs.
  5. Action required: Ensure LTD terms comply with the conditions specified in the July 15, 2008 circular for eligibility as lower Tier II capital.
  6. Action required: Train staff on the revised eligibility criteria and documentation for LTDs to avoid compliance gaps.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

💬 Banker Discussion

Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.

Loading comments…
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=8784&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.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
—