Page 12 - Banking Finance September 2021

RBI CORNER

being provided so that customers of Tier-I capital and Long Term Subordi- erative Banking e-conclave on January
non-banks do not face the risk of bank nated Bonds(LTSB) as Tier-II capital. 7, Gadkari said as a representative of
failure. "Banks have been providing the Centre and also as a representative
The Banking Regulation (Amendment)
the services to non-banks for their of the people, he would act as a bridge
Act, 2020 came into force with effect
payment and settlement needs. How- from June 29, 2020 for Primary (Ur- between the co-operative banks in
ever, if the bank, which provides pay- ban) Co-operative Banks (UCBs). Maharashtra and the Finance Ministry,
ment services to non-banks, is im- RBI, NABARD and the state govern-
In view of the changes mandated by
pacted, it can cause business disrup- ment. Gadkari had said co-operative
the amendments, the Reserve Bank
tion to the non-banks also," the RBI banks must compete with private
of India has released the draft circular
said. banks to make an impression on law-
on 'Issue and regulation of share capi-
It added that even if the disruption makers in Delhi. Gadkari added while
tal and securities - Primary (Urban)
were to be temporary, it could cause privatisation of co-operative banks has
Co-operative Banks'.
and spread instability in the system. been discussed since 1996, neither the
It has invited comments on the draft central government nor the RBI has
The RBI had announced its intent to
from UCBs, sector participants and ever forcefully imposed it on the
open up the payment system to non-
other interested parties by August 31, banks. Parliament passed amendments
banks in its monetary policy in April
2021. to the Banking Regulation Act in Sep-
2021.
tember 2020, bringing co-operative
RBI allows UCB to aug- RBI allows UCBs to refund banks under the RBI's supervision.
ment capital share capital
RBI revises guidelines for
The Reserve Bank came out with The RBI has decided to allow urban
draft guidelines allowing primary ur- co-operative banks (UCBs) to refund locker hiring
ban cooperative banks (UCBs) to aug- the value of the share capital to their The Reserve Bank came out with re-
ment capital through issuance of eq- members. vised guidelines for the hiring of lock-
uity shares, preference shares and "It has been decided in the interim to ers under which the liability of banks
debt instruments. permit UCBs which maintain CRAR of will be limited to 100 times its annual

The UCBs, it said, could raise share 9 per cent or above to refund the rent in case of fire, theft, building col-
capital by issue of equity to persons value of share capital to their mem- lapse or frauds by bank employees.
within their area of operation enrolled bers or nominees or heirs of deceased As per the revised guidelines, which
as members and also through addi- members on demand," the RBI said in shall come into effect from January 1,
tional equity shares to the existing a circular to UCBs. The Banking Regu- 2022, banks will be required to incor-
members. lation Act prohibits withdrawal or re- porate a clause in the locker agree-
duction in share capital by UCBs unless
The UCBs, as per the draft, will be ment prohibiting the hirer from keep-
the RBI specifies the extent up to
permitted to raise Tier-I and Tier-II ing anything illegal or hazardous in
capital by issuing Perpetual Non-Cumu- which and the conditions subject to lockers.
which such withdrawal or reduction
lative Preference Shares (PNCPS), Per- The RBI said it has reviewed the 'De-
may take place, RBI said.
petual Cumulative Preference Shares posit Locker/Safe Custody Article Facil-
(PCPS), Redeemable Non-Cumulative Union Road Transport & Highways ity provided by the banks' after taking
Preference Shares (RNCPS) and Re- and MSME Minister NitinGadkari had into consideration various develop-
deemable Cumulative Preference said there will be no forced ments in the area of banking and
Shares (RCPS). privatisation of co-operative banks in technology, nature of consumer griev-
order to bolster the co-operative sec-
The UCBs will also be allowed to issue ances and also the feedback received
tor.
Perpetual Debt Instruments (PDI) from banks and Indian Banks' Associa-
which will be eligible to be included in Addressing the Loksatta Urban Co-op- tion (IBA).

12 | 2021 | SEPTEMBER | BANKING FINANCE