What changed
RBI issued a circular on May 5, 2014, referencing a Supreme Court order from February 21, 2014. This order clarifies that credit institutions merged between October 1991 and March 1997, whose transferee banks were liable post-merger, must now contribute ₹50 lakh each and deposit excess interest tax collected via rounding off. This updates the earlier 2008 circular on the same subject.
What it means for you
Urban Co-operative Banks that are transferees of merged credit institutions from the 1991-1997 period must now set aside ₹50 lakh per institution and remit any excess interest tax collected through rounding off. This creates a financial obligation for affected UCBs, requiring immediate compliance and reporting to RBI regional offices.
What you must do
- Identify if your bank is a transferee of a credit institution merged between October 1991 and March 1997.
- Calculate and deposit ₹50 lakh per merged institution into the Trust Fund as per the Supreme Court order.
- Compute any excess interest tax collected via rounding off on loans and advances by the transferor bank and deposit it to the Trust Fund.
- Report compliance status to the concerned Regional Office of RBI promptly.
Who it affects
All Primary (Urban) Co-operative Banks, Transferee banks of merged credit institutions (1991-1997), Banks that collected interest tax via rounding off on loans and advances
What is the ₹50 lakh contribution for?
The Supreme Court order mandates that transferee banks of credit institutions merged between October 1991 and March 1997 must contribute ₹50 lakh each to the Trust Fund, as part of settling interest tax liabilities.
Does this apply to all UCBs or only those involved in mergers?
It applies to all UCBs that are transferee banks of credit institutions merged during the specified period (October 1991 to March 1997). Other UCBs not involved in such mergers are not directly affected.
What is the deadline for compliance?
The circular does not specify a deadline, but advises immediate action. Banks must report status to the concerned Regional Office of RBI as soon as possible.