Page 20 - Banking Finance August 2022

The Reserve Bank of India (RBI) had per customer, it said in another state- The exercise to nudge RRBs to come
imposed several restrictions, including ment. up with IPOs is seen providing liquidity
on withdrawals by depositors, on these and an avenue for raising capital from
The two banks, without permission of
two banks in May in the wake of their the market.
the RBI, cannot grant loans, make any
deteriorating financial positions.
investment, incur any liability -- includ- The exercise is the next step to provide
ing borrowal of funds and acceptance additional sources to RRBs to meet
RBI imposes restrictions of fresh deposits, disburse or dispose of their regulatory capital requirement
on two UP-based coopera- properties or assets. after the Reserve Bank of India (RBI),
in 2019, permitted such banks to issue
tive banks
Centre revives IPO plans perpetual debt instruments. The Cen-
The Reserve Bank on Thursday said it tre was also considering launching IPOs
for Regional Rural Banks
has imposed several restrictions, in-
of RRBs in 2019, as it was conducting
cluding on fund withdrawals, on two Central government has asked sponsor
a consolidation exercise in the regional
banks to identify regional rural banks
Uttar Pradesh-based cooperative
rural banking space, which saw the
(RRBs) that can be listed on the ex-
banks in view of their deteriorating fi- number of such lenders reduce from
changes based on defined criteria, re-
nancial position. The two lenders are
196 in 2005 to 43 in FY21.
viving an earlier plan to come up with
Lucknow Urban Co-operative Bank and
initial public offering (IPO) of such lend- The government is also undertaking
Urban Co-operative Bank Limited,
ers. the exercise to restructure RRBs in
Sitapur.
order to make them operationally vi-
All RRBs are presently unlisted. Spon-
The restrictions under the Banking
sor banks - that hold about 35 per cent able. After two straight years of losses
Regulation Act will remain in force for
in RRBs - have been asked to handhold in FY19 and FY20, RRBs reported a
six months. Customers of Lucknow Ur-
regional lenders at all stages from iden- consolidated net profit of Rs. 1,682
ban Co-operative Bank will not able to
tification of merchant bankers to the crore in FY21. Of the 43 RRBs, 30
withdraw more than Rs 30,000, as per
conclusion of IPO. While the Centre posted a net profit in FY21. However,
an RBI statement.
holds 50 per cent in RRBs, state gov- 17 RRBs out of 43 carried accumulated
The withdrawal limit in the case of ernments own the remaining 15 per losses of Rs. 8,264 crore as on March
Urban Co-operative Bank is Rs 50,000 cent. 31, 2021.
UTI Mutual Fund launches Gilt Fund with 10- year constant
duration
UTI Mutual Fund has launched UTI Gilt Fund with 10-year constant duration, an open-ended debt scheme investing
in government securities having a constant maturity of 10 years. The fund has a relatively high-interest rate risk and
relatively low credit risk. The New Fund Offer is open and will close on July 26.
According to the press release, the scheme's investment objective is to generate optimal returns with high liquidity
by investing in a portfolio of government securities such that the weighted average portfolio maturity is around 10
years. However, there can be no assurance that the Scheme's investment objective will be achieved. The Scheme
does not guarantee/indicate any returns.
"Aiming to offer new investment opportunities via varied products, our latest fund launch, UTI Gilt Fund with 10
year Constant Duration, is a suitable offering for strategic allocation in a duration fund with sovereign exposures in
the UTI Mutual Fund product suite. While diversified allocation to different asset classes like equity, fixed income &
gold has become an adage for investors, sovereign allocation within fixed income can offer a better value proposi-
tion by minimising credit risk, providing high liquidity while maintaining tax efficiency needs to be given more consid-
eration," said Anurag Mittal, EVP & Deputy Head of Fixed Income, UTI AMC Ltd.

20 | 2022 | AUGUST | BANKING FINANCE