Regulatory and Other Measures

January 2009

RBI/2008-09/349 Ref. No. UBD.PCB. Cir. No.32/ 09.18.201/2008-09 dated January 13, 2009

The Chief Executive Officer of All Primary (Urban) Co-operative Banks.

Instruments for Augmenting Capital Funds- UCBs

Please refer to our circular UBD.PCB. Cir. No. 4/ 09.18.201/2008-09 dated July 15, 2008 on the captioned subject, forwarding therewith guidelines on issuance of Preference Shares and Long Term Deposits (LTDs).

2. In this connection we further advise as under: (i) PNCPs held may be treated as shares for the purpose of compliance with extant share linking norms. (ii) No loans and advances should be sanctioned against the collateral of preference shares (including PNCPs). (iii) There is no prohibition on existing shareholders subscribing to Long Term Deposits
( LTDs).

RBI/2008-2009/353 Ref. No. UBD (PCB) BPD Cir No. 34 / 09.39.000/ 2008-09 dated January 20, 2009

The Chief Executive Officers of All Primary (Urban) Co-operative banks

UCBs – Delay in Cheque Collection

Delays in Cheque Clearing – Case No. 82 of 2006 before National Consumer Dispute Redressal commission (NCDRC)

As you may be aware, during August 2006, a case was filed before National Consumer Dispute Redressal commission, New Delhi (the Commission) under the Consumer Protection Act, 1986, inviting attention to the delay in cheque clearing and, specifically, to the issue of float in local and inter-city clearing. Admitted in public interest as Case No. 82 of 2006, the complainant had sought adequate compensation by way of interest for delay in collection.

2. The case was disposed of by the Commission on August 27, 2008, with the observation that the Reserve Bank with its
wide range of powers under the Payment and Settlement Act, 2007 would try to control the float, if any, arising due to delay in collection of cheques. During the course of hearings, orders were passed by the Commission culminating in the final order which is available @ http://www.ncdrc.nic.in/ CC820605.htm.

(c) The collection period of outstation cheques and interest payable thereon in case of delay shall be published on the notice board in a precise manner in bold/visible letters at conspicuous place in every branch.

4. In this context, a reference is invited to circular UBD (PCB) BPD Cir No 40/ 09.39.000/ 2007-08 April 15, 2008 wherein the scheduled UCBs were advised to formulate a comprehensive and transparent policy covering issues relating to (i) Immediate credit of local / outstation cheques (ii) Timeframe for collection of local / outstation cheques and (iii) Interest payment for delayed collection. The scheduled UCBs may formulate/revise their Cheque Collection Policy accordingly and forward a copy of the same to this Department and endorse a copy to Chief General Manager, Reserve Bank of India, Department of Payment and Settlement Systems, Central Office, Mumbai for perusal and confirmation before it is implemented by the banks.

RBI/2008-09/368 Ref. No. UBD (PCB) BPD Cir No: 47 /16.20.000/2008-09 dated January 30, 2009

The Chief Executive Officers of All Primary (Urban) Co-operative Banks

Placement of deposits with other banks by primary (urban) cooperative banks (UCBs)

Please refer to the guidelines contained in our circular UBD BPD PCB Cir 14/16.20.00/ 2007-08 dated September 18, 2007 and BPD PCB Cir 46/ 16.20.00/2002-03 dated May 17, 2003 on the captioned subject.

2. On the basis of representations received from banks and their Federations, the existing guidelines were reviewed. The revised guidelines on the subject are as under:

i)   Prudential inter-bank (gross) exposure limit

The total amount of deposits placed by an UCB with other banks (inter-bank) for all purposes including call money/ notice money, and deposits, if any, placed for availing clearing facility, CSGL facility, currency chest facility, remittance facility and non-fund based facilities like Bank Guarantee (BG), Letter of Credit (LC), etc., shall not exceed 20 per cent of its total deposit liabilities as on March 31 of the previous year. The balances held in deposit accounts with commercial banks and in permitted scheduled UCBs and investments in Certificates of Deposit issued by commercial banks, being inter bank exposures, will be included in this 20 per cent limit.

ii)  Prudential inter-bank counter party limit

Within the prudential inter-bank (gross) exposure limit, deposits with any single bank should not exceed 5 per cent of the depositing bank’s total deposit liabilities as on March 31, of the previous year.

iii) Exemptions from the prudential limit

As per the extant policy, non-scheduled UCBs in Tier I have been exempted from maintaining SLR in Government and other approved securities up to 15 per cent of their NDTL provided the amount is held in interest bearing deposits with the Public Sector Banks and IDBI bank Ltd. These deposits are exempted from the prudential limit on inter-bank exposure limits [Paragraph 2 (i) & (ii)].

The balances maintained by UCBs with the Central Cooperative Bank of the district concerned or with the State Cooperative Bank of the State concerned are treated as SLR under the provisions of Section 24 of the Banking Regulation Act, 1949(AACS). These deposits are exempted from the prudential limit on inter-bank exposure limits [Paragraph 2 (i) & (ii)].