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RBI exempts UCBs’ investment in Umbrella Organisation from non-SLR holding limits

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RBI exempts UCBs’ investment in Umbrella OrganisationOn March 3, 2022, the Reserve Bank of India (RBI) has exempted the investments made in Umbrella Organization (UO) by Primary (Urban) Co-operative Banks (UCBs) from non-Statutory Liquidity Ratio (non-SLR) holding limits prescribed in Paragraphs 2(i) and 2(iii)(b) of the RBI’s circular ‘Investments in Non-SLR securities by Primary (Urban) Co-operative Banks dated 30th January, 2009.

What are the limits?

i.Paragraph 2(i)- Non-SLR investments should be limited to 10% of a bank’s total deposits as on March 31 of the previous year. 

ii.Paragraph 2(iii)(b)- Investments in unlisted securities should not exceed 10% of the total non-SLR investments at any time.

Now with the latest revision in the above-mentioned circular by RBI, these limits will not be imposed on the investments in Non-SLR securities by primary UCBs.

Key Points:

i.The move is expected to encourage UCBs to subscribe to the capital of UO and acquire its membership.

  • The UO is a non-banking finance company (NBFC) with strong financial parameters.
  • It provides cross liquidity and capital support to the UCBs when needed.

ii.Non-SLR securities include debentures/bonds, preference shares, equity shares, mutual fund units, commercial paper, and investment in securities issued by a securitisation/reconstruction company.

iii.RBI had accorded regulatory approval to the National Federation of Urban Co-operative Banks and Credit Societies Ltd. (NAFCUB) in June 2019 for the formation of a UO for the UCB sector. 

  • The approval permits UCBs to subscribe to the capital of the UO on a voluntary basis. 
  • As at March-end 2021, there were 1,534 UCBs in the country, according to the RBI.

Recent Related News:

On 3rd January 2022, RBI issued a framework for facilitating small-value digital payments in offline mode using cards, wallets, mobile devices, etc, to push digital transactions in rural and semi-urban areas. The upper limit of an offline payment transaction was fixed at Rs 200, with a total limit on a payment instrument being at Rs 2,000 at any point in time.

About Reserve Bank of India (RBI):

Establishment– April 1, 1935
Headquarters– Mumbai, Maharashtra
Governor– Shaktikanta Das
Deputy Governors– Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar