Page 18 - Banking Finance April 2022

CO-OPERATIVE BANK NEWS

10 % of a bank's total deposits as on 2021, there were 1,534 UCBs in the Third, UCBs can issue Perpetual Debt
March 31 of the previous year. Further, country, according to the RBI. Instruments (PDIs) for Tier - I Capital
investments in unlisted securities shall and Long Term Subordinated Bonds as
not exceed 10 % of the total non-SLR New RBI guidelines on ur- Tier - II Capital. It can be issued to in-
investments at any time. stitutional investors also, with the con-
ban cooperative banks
Non-SLR securities include debentures/ sent of the depositors.
bonds, preference shares, equity In light of the BR Amendment Act of It may be pertinent to understand that
shares, mutual fund units, commercial 2020, the new fundraising norm was Tier - I Capital is the primary funding
paper, and investment in securities is- proposed and public comments on the source of the bank. It entails share-
sued by a securitisation/reconstruction draft were invited by RBI last year in
2021. The 2020 amendment substi- holder equity and retained earnings
company.
tuted Section 12 to provide for the is- disclosed in their financial statements.
Some of the functions that the UO sue and regulation of securities by co- On the other hand, Tier - II Capital or
could perform include liquidity man- operative banks. supplementary capital includes undis-
agement for UCBs (those with surplus closed funds, revaluation reserves, hy-
liquidity can park it with the UO, and The 2022 notification specifies that brid capital instruments, junior debt
those facing deficit could draw funds UCBs can raise capital through three securities, general loan-loss, uncol-
from it), establishing a common IT in- broad methods, viz:- issuance of equity
frastructure, including payment gate- shares, preference shares, and debt lected reserves, etc.
ways and data centres that could be instruments. The notification specifies that such
shared by all banks, and facilitating First, UCBs can raise funds by issue of fundraising capital instruments can be
mergers in the sector. equity to enrolled members within the issued by the UCBs with the prior ap-
RBI had accorded regulatory approval area of operation or through additional proval of RBI. UCBs must seek permis-
to the National Federation of Urban equity shares to existing members. sion via application to the regional of-
Co-operative Banks and Credit Societ- Second, UCBs can augment Tier - I & fice of RBI. The application shall be
ies Ltd. (NAFCUB) in June 2019 for the Tier - II capital by issuing Perpetual accompanied by an offer document,
formation of a UO for the UCB sector. Cumulative & Non-Cumulative Prefer- prospectus, information memoran-
The approval inter-alia permits UCBs ence Shares, and, Redeemable Cumu- dum, a compliance certificate from a
to subscribe to the capital of the UO lative & Non-Cumulative Preference Chartered Accountant, and relevant
on a voluntary basis. As at March-end Shares. disclosures. T

'Bad Bank' to start off with 15 stressed assets worth Rs.50,000 crore

In a bid to clean up their books, Banks will be transferring 15 stressed assets aggregating about Rs. 50,000 crore by
March-end 2022 to the National Asset Reconstruction Company Ltd (NARCL), according to State Bank of India (SBI)
Chairman Dinesh Kumar Khara.
The aforementioned assets (above Rs. 500 crore each) are part of the 38 identified stressed assets aggregating Rs.
83,000 crore that Banks will be transferring to NARCL.
Overall, chunky stressed assets aggregating about Rs. 1.50 lakh crore are expected to be transferred to NARCL.
NARCL, which has already been set up by banks, will aggregate and consolidate select stressed assets in the financial
system for their subsequent resolution. Public sector banks are holding majority stake in the ARC.
Along with NARCL, a service company/operational entity, India Debt Resolution Company Ltd (IDRCL), has also been
floated for resolving these stressed assets. Private sector banks are holding majority stake in the DRC.

Khara said, "The transfer (of stressed assets) will happen in a phased manner. In phase one, about 15 accounts ag-
gregating to about Rs. 50,000 crore are expected to be transferred to NARCL. We are trying to have these accounts
transferred within this financial year after completing all the required processes."

18 | 2022 | APRIL | BANKING FINANCE