What changed
RBI issued a new master circular (RBI/2022-23/05) superseding the September 2021 version, consolidating all existing instructions on investments by Primary Urban Co-operative Banks. The circular updates references and ensures all prior guidelines are unified under one document.
What it means for you
Urban co-operative banks now have a single reference for all investment-related compliance, reducing ambiguity. Key limits like the 2% of owned funds cap on shares in other co-operative societies remain unchanged, but banks must ensure their internal policies and accounting practices match the consolidated text.
What you must do
- Review and update your bank's investment policy to align with the consolidated master circular.
- Ensure compliance with the 2% of owned funds limit for shares in other co-operative societies (excluding specified exemptions).
- Verify that broker engagement limits and SGL account procedures follow the circular's guidelines.
- Train treasury and compliance teams on the updated categorisation and valuation norms for investments.
Who it affects
Primary Urban Co-operative Banks, Treasury departments of UCBs, Compliance officers at UCBs, Auditors reviewing UCB investment portfolios
What is the limit on holding shares in other co-operative societies?
Total investments in shares of co-operative institutions (excluding specified exemptions) must not exceed 2% of the bank's owned funds. Additionally, investment in any single such society cannot exceed 5% of that society's subscribed capital.
Does this circular change any existing investment limits?
No, it consolidates existing instructions without introducing new limits. Banks should refer to this master circular as the single source for all investment guidelines.
Are there any exemptions to the shareholding restrictions?
Yes, shares acquired through state government funds, central co-operative bank holdings in state co-operative banks, and UCB holdings in affiliated central co-operative banks are exempt from the 2% limit.