The Reserve Bank of India through Master Circular dated September 20, 2021 has provided guidelines for Investments by Primary (Urban) Co-operative Banks. The Master Circular provides that the total investments of a co-operative bank in the shares of co- operative institutions shall not exceed 2 per cent of its owned funds (paid-up share capital and reserves). The investment of a bank in the shares of any one co-operative institution shall not exceed 5 per cent of the subscribed capital of that institution. These limits are applicable to investments except shares acquired through funds provided by the State Government for that purpose or in the case of a primary (urban) co-operative bank (UCB), holding of shares in the central co-operative bank to which it is affiliated or in the state cooperative bank of the state in which it is registered.
The retirement of the share capital contributed by a bank to the shares of any society should be completed in 10 equal annual installments commencing from the co-operative year immediately following the year in which the concern commences business or production. A co-operative bank should not, except with the permission of the Reserve Bank, contribute to the share capital of a society if it is situated outside its area of operation.
