February 17, 2006
The Chief Executive Officers of all Primary (Urban) Co-operative
Banks
Dear Sir /Madam
Banking Regulation Act 1949 (AACS)- Investments
in Government and other approved securities by UCBs - Exemption under Section
24A
Please refer to our circular UBD.No.BR.Cir/42/16.26.00/200-01
dated April 19, 2001 on the above subject advising Primary (Urban) Co-operative
Banks (UCBs) to maintain a certain percentage of assets under section 24 of
the Banking Regulation Act, 1949 (AACS) in the form of Government and other
approved securities.
2. It has been represented by UCBs and their
Federations that many UCBs are facing difficulties in making investments in
government securities due to lack of access to the government securities market
or necessary expertise in the matter. Taking this into consideration, it has
been decided that limited exemption from the requirement could be granted to
a class of UCBs. Accordingly, the non-scheduled primary (urban) co-operative
banks, having single branch-cum-head-office or having multiple branches within
a single district, having a deposit base of Rs.100 crore or less would be exempted
from maintaining SLR in prescribed assets upto 15% of their DTL on keeping the
required amount, in interest bearing deposits, with State Bank of India and
its subsidiary banks and the public sector banks including Industrial Development
Bank of India Ltd.
3. For the purpose of eligibility for exemption,
deposit base of UCBs will be determined on the basis of fortnightly average
of the DTL in the immediate preceding financial year.
4. The exemption will be applicable with
immediate effect in respect of above categories of UCBs and shall be in force
upto March 31, 2008. During this period UCBs should build up adequate infrastructure,
risk management practices including human resource and technological up-gradation
so as to reduce market related risk.
5. A copy of the notification UBD.PCB.6657/16.26.000/05-06
dated December 26, 2005 published in Part III Section 4 of the Gazette of India
(Extraordinary) dated December 31, 2005 is enclosed.
6. Please acknowledge receipt to the concerned
Regional Office of the Reserve Bank of India
Yours faithfully,
(N.S.Vishwanathan)
Chief General Manager in-Charge