presentation on relevant important circulars as applicable ... · pdf filecirculars are issued...

Presentation on

Relevant Important Circulars as

applicable to UCBs as issued by

Reserve Bank of IndiaReserve Bank of India

Presented @ Mumbai

on 28th May 2011

Types of Institutions whom separate

Circulars are issued by RBI• NBFCs

• Financial Institutions (FIs, such as Exim Bank, NABARD, NHB, IFCI, IIBI, SIDBI, SFCs etc.)

• Scheduled Commercial Banks (Nationalised Banks, RRBs & Local Area Banks)Banks, RRBs & Local Area Banks)

• Urban Co-op. banks (UCBs) (Issued by UBD, RBI)

• Foreign Banks

• State Co-op. Banks / District Central Co-op. Banks

• AD Category Banks

APPLICABLE ACTS, GUIDELINES ETC. FOR UCBs

• THE MULTI STATE CO-OP. SOCIETIES ACT, 2002 (MSCS

Act)

• GUIDELINES / CIRCULARS ISSUED BY RBI

• RESERVE BANK OF INDIA ACT, 1934 (RBI Act)

• BANKING REGULATION ACT, 1949 (BR Act)• BANKING REGULATION ACT, 1949 (BR Act)

• ACCOUNTING STANDARDS / GUIDELINES ISSUED BY

ICAI

• Maharashtra Co-op. Societies Act (MCS Act)

Features of Circulars issued by RBI

• Separate applicability of Circulars, unless

issued by RBI, for specific category of Bank

• Master Circulars - Consolidated & updated

every year on 1st Julyevery year on 1st July

• Applicability of RBI Guidelines is in addition to

Guidelines issued by ICAI etc. (In certain areas

/ issues, RBI Guidelines are silent)

TYPES OF URBAN CO-OP. BANKS (UCBs)

• SCHEDULED BANKS (REF.: SCH. 2 OF RBI ACT,

1934)

• GOVERNED BY MCS ACT, 1960 OR RESP. STATE ACT (IF

AREA OF OPERATION IS STATE)

• GOVERNED BY MSCS ACT, 2002 (IF AREA OF OPERATION IS • GOVERNED BY MSCS ACT, 2002 (IF AREA OF OPERATION IS

IN MORE THAN 1 STATE)

• NON-SCHEDULED BANKS

• GOVERNED BY MCS ACT, 1960 OR RESP. STATE ACT (IF

AREA OF OPERATION IS STATE)

• GOVERNED BY MSCS ACT, 2002 (IF AREA OF OPERATION IS

MORE THAN 1 STATE)

TYPES OF URBAN CO-OP. BANKS (UCBs) – FROM

RBI PERSPECTIVE 2.1.4 annex 4

• TIER I UCBs (Unit Bank, having deposit base of

less than 100 cr. or Banks having Branches in more than 1 District, but deposit base in any single District is more than 95% of Total Deposits)Deposits)

• TIER II UCBs (Bank which is not a TIER I Bank)

Master Circulars issued by RBINOT COVERED FOR DISCUSSIONS

1. Frauds - Reporting to RBI

2. Management of Advances

3. Income recognition, Asset classification & Provisioning etc.

4. Detection and Impounding of Counterfeit Notes

5. Customer Services5. Customer Services

BEARING ON FINANCIAL STATEMENTS / NOTES TO ACCOUNTS

6. Investments

7. Guarantees, Co-Acceptances & Letters of Credit

8. Know Your Customer (KYC) Norms / Anti-Money Laundering

(AML) Standards / Combating of Financing of Terrorism (CFT)

/ Obligation under PMLA, 2002

9. Inspections & Audit systems

Master Circulars issued by RBI

10. Cash Reserve Ratio (CRR) & Statutory Reserve Ratio

(SLR)

11. Maintenance of Deposit Accounts

12. Interest Rates on Rupee Deposits

13. Priority Sector Lending13. Priority Sector Lending

14. Capital Adequacy

15. Housing Finance

16. Exposure Norms and Statutory / Other Restrictions

17. Board of Directors

Master Circular – Investments• INVESTMENT POLICY – ROLE OF AUDITOR

– UCBs should lay down, with the approval of their Board of Directors, the broad Investment Policy with objectives to be achieved.

– Investment Policy should be reviewed each year.

Investment Policy should include– Investment Policy should include

• Guidelines on quantity (ceiling) & quality of each type of security

• Indicate authority to put through investment deals

• Reporting systems to be adopted

• Clearly spell out internal control mechanism, accounting standards, audit, review & reporting system to be evolved.

Master Circular – Investments

• Restrictions

– Holding Shares in Other Co-op. Banks (certain

exemptions given. But, Total Investments shall not

exceed 2% of its owned funds & shall not exceed exceed 2% of its owned funds & shall not exceed

5% of subscribed capital of Investee Institution)

(Sec. 19 of BR Act, 1949)

– No capital contribution in Institution, which is out

of area of operation. (except formed for Mutual

protection)


• Restrictions

– Should not undertake purchase / sale transactions

with broking firms or other intermediaries on

principal to principal basis

– Permitted to participate in designated Interest Rate – Permitted to participate in designated Interest Rate

Future (IRF) recognized SEBI

– Limit of 5% of total transactions (purchases & sales)

can be entered by Banks during yr. with each

approved broker

– Secondary market transactions in Govt. Securities be

settled on T+1 basis (except Repo)


• Restrictions

–Maintain investments in Govt. Securities in SGL A/cs.

with RBI or CSGL A/c. with PDs, Scheduled

Commercial Banks, State Co-op. Banks, Depositories

& SHCIL.

– Banks should not capitalise broken period interest

paid to seller as part of purchase cost, but treat it as

an item of expenditure under P&L A/c.

– Banks should not be in an oversold position

Master Circular – Investments• STATUTORY (SLR) INVESTMENTS

–Maintain liquid assets, which should not be less than

25% its’ Net Demand & Time Liabilities (NDTL) in India

(in addition to the minimum Cash Reserve

Requirement). (Sec. 24 of BR Act, 1949).Requirement). (Sec. 24 of BR Act, 1949).

– Liquid assets = Cash, gold or unencumbered approved

securities

– Approved securities (defined u/s. 5(a) (i) & (ii) of The

BR Act, 1949

– From March 31, 2011 onwards all Non-scheduled

UCBs shall maintain SLR in Government and other

approved securities up to 25% of their NDTL.


Restrictions on Deposits

• Total deposits placed with other Banks for all

purposes, shall not exceed 20% of its’ total

deposits as on March 31 of pr. year. Same should

not exceed 5% for single Bank.not exceed 5% for single Bank.

• The total UCB deposits accepted by Scheduled

UCB should not exceed 10% of its total deposits

as on 31st March of previous financial year.


• Securities be classified in 3 categories, viz;

– ‘Held to Maturity’

– ‘Available for Sale’

– ‘Held for Trading’,– ‘Held for Trading’,

• Non-SLR Investments limited to 10% of Bank’s total deposits as on March 31 of previous yr.

• Investment in unlisted securities should be subject to minimum rating & should not exceed 10% of total Non-SLR Investments


• Fresh investments in shares of All India Financial Institutions (AIFIs) not allowed. Existing shares be phased out & till such time they are held, will be reckoned as Non-SLR Investments.

• All fresh investments under Non-SLR category be • All fresh investments under Non-SLR category be classified under HFT / AFS categories only & marked to market.

• Should build up IFR of minimum of 5% of HFT & AFS Investments. UCBs are free to build up higher IFR up to 10%.


HTM AFS HFT

Definition Acquired with

intention to hold up to

maturity

Acquired with intention to

trade. (Not sold in 90 days,

be shifted to AFS. While

shifting, it is to be marked

to market)

Securities that do

not fall in HTM &

AFS

Profit on

Sale

1st to P&L A/c. Then

to IFR

P&L A/c. P&L A/c.

Loss(on P&L A/c. P&L A/c. P&L A/c.Loss(on sale)

P&L A/c. P&L A/c. P&L A/c.

Amortization

/ Marked to

Market

Amortized Marked to Market

every 31st march

Marked to Market

every quarter end

Provision Securities under AFS & HFT be valued scrip-wise & depreciation /

appreciation be aggregated for each classification separately for

AFS & HFT. Net depreciation, be provided for. Net appreciation, be

ignored. Net depreciation to be provided for in any 1 classification,

should not be reduced on a/c. of net appreciation in other

classification.


HTM AFS HFT

Restrictions should not exceed 25% of

Bank's total investmentsSilent Silent

Exemptions Permitted to exceed 25% limit,

if excess comprises only SLR

securities & Total SLR

securities held in HTM securities held in HTM

category is not more than 25%

of NDTL as on last Friday of 2nd

preceding fortnight.

Shifting to &

from HTMOnce in year. Normally at beginning of year.

(Marked to market, while shifting)

Shifting from

AFS to HFT or

HFT to AFS

Allowed Allowed


• Investments be classified in the following categories (For disclosure in Balance sheet)– (i) Government securities

– (ii) Other approved securities

– (iii) Shares

– (iv) Bonds of PSU

(v) Others– (v) Others

• Govt. Securities were accounted either on “Trade Date” or “Settlement Date”. RBI vide Circular dated 18-01-2011, with view to bring uniformity, directed that Banks should follow “Settlement Date” accounting for recording purchase & sale transactions in Govt. Securities. These instructions are applicable with immediate effect.


• Prudential norms on Investment in Zero

Coupon Bonds

• RBI vide Circular dated 29-09-2010 directed that

UCBs should not invest in Long Term Zero

Coupon Bonds (ZCBs) issued by Corporates & Coupon Bonds (ZCBs) issued by Corporates &

NBFCs, unless issuer builds up Sinking Fund for

all accrued interest & keeps it invested in liquid

investments / securities (Government bonds).

Master Circular –

Guarantees, Co-Acceptances & Letters of Credit

• Guarantees

• Banks may provide only Financial Guarantees and not Performance Guarantees.

• Scheduled Banks may issue Performance • Scheduled Banks may issue Performance Guarantees on behalf of their constituents subject to exercising due caution in the matter.

• Guarantees should not be issued for period exceeding ten years.

Master Circular –


• Guarantees

• Total volume of Guarantees outstanding at

any time not to exceed 10% of total owned

resources (Paid up capital, Reserves & resources (Paid up capital, Reserves &

Deposits).

• Unsecured Guarantees be limited to 25% of

owned funds (Paid up capital + Reserves) or

25% of total guarantees, whichever is less.

Master Circular –


• Letter of credits

• Large LCs are issued under two authorised

signatures, where 1 of signatures should be

from Head Office / Controlling Office.from Head Office / Controlling Office.

Master Circular – KYC / AML / CFT /

Obligation under PMLA, 2002

• Guidelines issued by RBI are under Section

35A of BR Act, 1949

• KYC Policy : Banks should frame KYC Policies

incorporating following 4 elements:incorporating following 4 elements:

– a) Customer Acceptance Policy

– b) Customer Identification Procedures

– c) Monitoring of Transactions and

– d) Risk Management.



• Banks should maintain records for at least 10

years from the date of transactions between

the bank and the client. (PMLA Act, 2002)

• Exemptions for KYC• Exemptions for KYC

– Banks may notify customer when the balance

reaches Rs. 40,000 or total credit in a year reaches

Rs. 80,000, that appropriate documents for

conducting KYC must be submitted otherwise

operations in the account will be stopped.



AML / CFT / Obligation under PMLA, 2002

• Cash Transactions Reports (CTR) - Series of cash

transactions in month, exceeding Rs. 10 lakh.

• Suspicious Transactions Reports (STR)• Suspicious Transactions Reports (STR)

• Counterfeit Currency Reports (CCR)

Master Circular – Inspections & Audit

systems

Types of audits

• Internal audits (Periodicity should be at least

once in every 12 months, which should be

really of surprise character.)really of surprise character.)

• Supplementary short inspections (Internal

inspection be supplemented by surprise short

inspections at irregular intervals)


systems

• Revenue audit

• Credit Portfolio audit (System of exclusive

scrutiny of credit portfolio with focus on larger

advances & group exposures at regular intervals advances & group exposures at regular intervals

be introduced.)

• Investments portfolio audit (Subjected to audit

by Internal Auditors & in their absence, by CAs

out of panel maintained by the Registrar of Co-

op. Societies). Reports be placed, once a quarter.


systems

• Concurrent Audit (Branches with Deposits over Rs. 50 cr. are required to introduce Concurrent Audit.)

– CAs / Audit Firms associated with Bank for Internal / Concurrent Audits should not undertake / Concurrent Audits should not undertake Statutory Audit assignment for same period.

• Audit for Electronic Data Processing Systems (EDP Audit Cell be constituted as part of Inspection & Audit Dept. to carry out EDP Audit)


systems

• Audit Committee

– Audit Committee of Board of Directors may

consist of Chairman & three / four Directors, one

or more of such Directors being CAs or persons or more of such Directors being CAs or persons

having experience in management, finance,

accountancy & audit system, etc.

– Detailed scope given

Important announcement by RBI vide

Circular dated 15-04-2011

• “In partial modification of the instructions

contained therein, it is advised that the system

audit may be conducted by a Certified

Information Systems Auditor (CISA) and Information Systems Auditor (CISA) and

registered with Information Systems Audit and

Control Association (ISACA) or by a holder of a

Diploma in Information System Audit (DISA)

qualification of the Institute of Chartered

Accountants of India (ICAI).

Master Circular – Board of Directors

• Constitution – MCS Act

• Dos & Don’ts

• Loans to Directors : UCBs are prohibited to make, provide or renew either secured or unsecured loans & advances or extend any other financial accommodation advances or extend any other financial accommodation to their Directors, or their relatives & Firms / Concerns / Companies in which they are interested. (Exemptions : staff Directors, CEOs, Directors of Salary Earners Co-ops., Loans Ag. FDs / LIC Policies)

• Periodicity of reviews of various aspects given in detail

Master Circular – CRR & SLR

• CRR

– Sec. 42 (1) RBI Act, 1934 governs Scheduled UCBs

& Sec. 18 of BR Act govern Non Scheduled Banks.

• SLR• SLR

– Provisions of Sec. 24 of BR Act govern

maintenance of SLR for all UCBs.


• CRR & SLR

– Maintain Daily register stating Day-to-day position of liquidity of Bank (Sec. 18 & 24 of BR Act, 1949)

– CRR is 6% of Bank's total Net Demand & Time LiabilitiesLiabilities

• Scheduled UCBs can maintain on average daily balance, a minimum of 70% of prescribed CRR balance based on their Net Demand & Time

• Liabilities (NDTL), as on last Friday of second preceding fortnight.


• CRR for Non-scheduled banks

– In terms of Sec. 18 of BR Act, 1949, is required to

maintain on daily basis CRR of amount not less

than 3% of its NDTL as obtained on last Friday of than 3% of its NDTL as obtained on last Friday of

the second preceding fortnight.


• How to work out NDTL

All Demand Deposits

Add All Time Deposits

Add Net Liabilities to Banking SystemAdd Net Liabilities to Banking System

Ignore Net Assets to Banking System

Add Inter Branch Accounts

Add Accrued interest on Deposits

Add All other liabilities & provisions

Ignore Share Capital & Reserves

Master Circular – Maintenance of Deposit

Accounts

• The banks are required to obtain PAN / GIR

number of a depositor opening an account

with an initial deposit of Rs.50,000/- and

above.above.

• Instructions for Safe Deposit Locker Accounts

• Operational & Nomination instructions

• Instructions for Joint Accounts, Unclaimed

deposits etc.

Master Circular – Interest Rates on

Rupee Deposits

• Interest payable on Current Accounts– “UCBs may, at their discretion, pay interest at a rate

not exceeding half per cent per annum on current accounts.”

• Interest payable on Savings Accounts• Interest payable on Savings Accounts– 4% pa – payable half yearly or quarterly. (RBI, vide

Circular dated 03-05-2011, increased interest rate on Domestic & Ordinary Non-Resident Savings Deposits & Savings Deposits under Non-Resident (External) A/cs. by 0.50% from 3.50% to 4.00% pa, with immediate effect.

– Daily product basis


Rupee Deposits

• Interest payable on Term Deposits

– Freedom given to Banks

– Should offer uniform rates on Deposits below Rs. 15 lakhfor same maturity.

– For Deposits of Rs 15 lakh & above Banks may discriminate– For Deposits of Rs 15 lakh & above Banks may discriminate

– For staff, Bank may at its discretion allow additional interest at rate not exceeding 1% pa over & above rate of interest.

– Banks may offer higher rate of interest on Term Deposits of any size, to senior citizens.

– Banks are free to determine their own penal interest rates for premature withdrawal of Term Deposits.


Rupee Deposits

• Interest on savings bank accounts should be

credited on regular basis whether the account

is operative or not.is operative or not.

• “If a Fixed Deposit Receipt matures and

proceeds are unpaid, the amount left

unclaimed with the bank will attract savings

bank rate of interest. “

Master Circular – Priority Sector

Lending• 40 per cent of Adjusted Bank Credit (ABC) or credit

equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

• Adjusted Bank Credit (ABC) = Total Loans & Advance plus investments in Non-SLR Bonds (Investments made by Banks in Non-SLR Bonds held in HTM category will not be taken in Non-SLR Bonds held in HTM category will not be taken into account for calculation of ABC. However, fresh investments by Banks in Non-SLR Bonds will be taken into account for the purpose.

• Increased limit of Housing Loans under Priority Sector Advances from Rs. 20 lakh to Rs. 25 lakh. Change will be applicable to housing loans sanctioned on or after April 1, 2011. . (RBI Circular, dated 11-05-2011)

Master Circular – Capital Adequacy

• Vide Sec. 11 of BR Act, no Co-op. Bank shall

commence or carry on banking business

unless aggregate value of its’ paid up Capital &

Reserves is not less than Rs. 1 lakh.Reserves is not less than Rs. 1 lakh.

• Vide Sec. 22 (3) (d) of BR Act, RBI can

prescribe minimum entry point capital (entry

point norms) from time to time, for setting-up

of a new UCB.

Master Circular – Capital Adequacy• Share linking to Borrowings

• RBI has prescribed following share linking norms:

– 5% for unsecured borrowings

– 2.50% for secured borrowings

(Vide Circular dated 15-11-2010, RBI exempted UCBs, which maintain CRAR of 12% or above on continuous which maintain CRAR of 12% or above on continuous basis, from extant mandatory share linking norms)

• For secured borrowings by SSIs, out of 2.50% of borrowings, 1% can be collected initially & balance 1.50% can be collected in next 2 years.

• CAR has been prescribed @ 9%

• For UCBs holding AD – 1 (Forex Licence), it is minimum 12%.

Master Circular – Capital Adequacy• Components of Tier I Capital

– Paid-up Sh. Capital & Non refundable Contributions

(Admission fees)

– Perpetual Non-Cumulative Preference Shares (PNCPS).

– Capital Reserve / Surplus from sale of Assets & Free Reserves

(Exclude Reserves created out of Revaluation of Fixed Assets /

created to meet liabilities from Tier I Capital. Free Reserves to created to meet liabilities from Tier I Capital. Free Reserves to

exclude Reserves / Provisions created to meet anticipated

losses, losses on account of fraud etc., Depreciation in

Investments & Other Assets & Other liabilities. Example,

"Building Fund" is Free Reserves, BDDR be excluded.)

– Innovative Perpetual Debt Instruments

– Surplus in P&L A/c. (Balance after appropriation towards

Dividend payable, Education Fund, Other funds, Asset loss, etc.)

Master Circular – Capital Adequacy• Components of Tier II Capital

– 45% of Revaluation Reserves (balance 55% to be ignored)

– General Provisions and Loss Reserves (Such provisions of

general nature, which are not attributed to identified potential

loss or a diminution in value of an asset or a known liability.

Such as General provision for Std. Assets, excess provision on

sale of NPAs etc. could be considered for inclusion under this sale of NPAs etc. could be considered for inclusion under this

category. Such provisions which are considered for inclusion in

Tier II capital will be admitted up to 1.25% of total weighted

risk assets.)

– Additional general provisions (floating provisions) for bad debts

i.e., provisions not earmarked for any specific loan impairments

(NPAs) may be used either for netting off of gross NPAs or for

inclusion in Tier II capital but cannot be used on both counts.

Master Circular – Capital Adequacy

• Components of Tier II Capital

– Investment Fluctuation Reserve

– Hybrid Debt Capital Instruments (Like Tier II Preference Shares, Perpetual Cumulative Preference Shares (PCPS), Redeemable Non Cumulative Preference Shares (RNCPS) & Redeemable Cumulative Preference Shares (RCPS))

– Long Term (Subordinated) Deposits (Issued for minimum – Long Term (Subordinated) Deposits (Issued for minimum period of not less than 5 years) (To be issued subject to compliance with Bye-laws / Provisions of Co-operative Societies Act under which they are registered and with the approval of the concerned Registrar of Co-operative Societies / Central Registrar of Cooperative Societies concerned)

• Subordinated Debt Instruments will be limited to 50% of Tier I capital.

• Tier II capital can not exceed Tier I capital.

Master Circular – Housing Finance

– The banks may grant housing loans up to a

maximum of Rs. 25 lakh per beneficiary of a

dwelling unit.

– However, Tier II UCBs ( all other UCBs which are

not Tier I UCBs (Banks having Deposits below Rs.

100 cr.) may extend individual housing loans up to

a maximum of Rs. 50 lakh per beneficiary of a

dwelling unit subject to extant prudential

exposure limits.

Master Circular – Housing Finance

• Exposures which may not be classified as CRE

Loans extended against Security of future rent

receivables (Lease Rent Discounting)

– Lease rental agreement between the lessor & – Lease rental agreement between the lessor &

lessee has a lock in period which is not shorter

than the tenor of loan

– There is no clause which allows a downward

revision in Rentals during the period covered by

the loan

Master Circular – Exposure Norms &

Statutory / Other Restrictions

• Exposure to individual borrower should not exceed 15% of capital funds

• Exposure to group of borrowers should not exceed 40% of capital funds (Definition of a group is left to perception of Banks. Guiding principles is perception of Banks. Guiding principles is commonality of management & effective control)

• Exposure shall include both credit exposure (Loans and Advances) & investment exposure (non–SLR)

• "Capital Funds" for the purpose of exposure norm would comprise both Tier I and Tier II Capital as defined in our Master Circular on Capital Adequacy.



• UCBs may utilise up to 15% of their total deposit

resources (as on March 31 of previous financial

year) to provide housing, real estate and

Commercial Real Estate loans.Commercial Real Estate loans.

• Scheduled UCBs should not place deposits with

other scheduled/non-scheduled UCBs.


Statutory / Other Restrictions• Non-scheduled PCBs are permitted to place deposits

with strong scheduled PCBs complying with the following norms– Bank complies with the prescribed level of CRAR.

– Net NPAs of Bank are less than 7%.

– Bank has not defaulted in the maintenance of CRR/SLR for – Bank has not defaulted in the maintenance of CRR/SLR for the last two years

– Bank has declared net profits for the last three consecutive years

– Bank complies with prudential norms on income recognition, asset classification & provisioning, exposure ceilings & loans & advances to directors

– Deposits placed by non-scheduled UCB with Scheduled UCB should not exceed 5% of Depositing Bank’s total deposits as on March 31 of previous year.

RBI Circular dated 18-11-2010 - Limit on Unsecured Adv.

Criteria UCBs with

DTL up to

Rs. 10 Cr.

UCBs with

DTL above

Rs. 10 Cr.

& up to

Rs. 50 Cr.

UCBs

with DTL

above Rs.

50 Cr. &

up to Rs.

100 Cr.

UCBs with

DTL

above

Rs. 100

Cr.

UCBs having Rs. 1 lakh Rs. 2 lakh Rs. 3 lakh Rs. 5 lakhUCBs having

CRAR equal

to or more

than 9 %

Rs. 1 lakh Rs. 2 lakh Rs. 3 lakh Rs. 5 lakh

UCBs having

CRAR less

than 9 %

Rs. 25,000 Rs. 50,000 Rs. 1 lakh Rs. 2 lakh


Statutory / Other Restrictions• UCBs can not give loans (fund & non fund based)

– Against security of its own shares(Sec. 20(1)(a)-BR Act)

– Against FDs of other Banks

– Bridge Loans / Interim Finance (Including against Capital /

Debentures issues and / or in form of loans of bridging nature, Debentures issues and / or in form of loans of bridging nature,

pending raising of long term funds)

– Stockbrokers (against shares & debentures / bonds, or other

securities, such as FDs, LIC policies etc.)

– Commodity brokers

– NBFCs (except, engaged in hire- purchase / leasing)



• Total unsecured advances (with surety &

without surety ) granted by UCBs to its

members should not exceed 15% of its

Demand & Time Liabilities (DTL)Demand & Time Liabilities (DTL)

• Advances against units of mutual funds can be

extended only to individuals as in the case of

advances against the security of shares,

debentures and bonds


Statutory / Other Restrictions• Exposure of UCBs to Housing, Real Estate & CRE would

be limited to 10% of their total assets. This could be exceeded by an additional 5% of total assets for purpose of grant of housing loans to individuals for purchase or construction of dwelling units costing up to Rs. 10 lakh. (RBI Circular, dated 11-05-2011)(RBI Circular, dated 11-05-2011)

• Exposure of State Co-op. Banks (StCBs) & Central Co-op. Banks (CCBs) to Housing Finance would be limited to 5% of their total assets, as against 10% of their total loans and advances. Total assets may be reckoned based on Audited Balance Sheet as on March 31 of preceding financial year. (RBI Circular, dated 20-01-2011)

Other important Circulars issued by RBI

• BR Act

- Area of operation – Prior RBI & ROC approval is must, Change in Bye-laws

- Opening Branches, Closing Branches, Upgradationof Extension Counter to Branch – Prior RBI of Extension Counter to Branch – Prior RBI approval is must

- ATMs (On site & Off site) can be opened (subject to conditions) - Without approval of RBI

- Shifting Branches - Prior RBI approval is must (except shifting in same Municipal Ward / locality)

Other important Circulars issued by RBI

• Asset Liability Management (ALM) System in Tier

I & Tier II UCBs (Other than Scheduled)

– Formation ALCO Committee

– Negative gap in 1-14 days & 15-28 days should not – Negative gap in 1-14 days & 15-28 days should not

exceed 20%.

– For other UCBs, Negative gaps / Mismatches in Next

day, 2-7 days, 8-14 days & 15-28 days should not

exceed 5%, 10%, 15% & 20%, respectively.

MARKING SYSTEM UNDER

CAMELSC RATING SYSTEM

• CAPITAL ADEQUACY - 12%

• ASSET QUALITY - 20%

• MANAGEMENT - 12%

• EARNING APPRAISAL - 16%• EARNING APPRAISAL - 16%

• LIQUIDITY APPRAISAL - 12%

• SYSTEMS & CONTROLS - 08%

• CO-OPERATION - 20%

PLEASE ASK QUESTIONS BEFORE I SAY

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