RBI allows UCBs to refund share capital to members

The RBI has decided to allow urban co-operative banks (UCBs) to refund the value of the share capital to their members.

“It has been decided in the interim to permit UCBs which maintain CRAR of 9 per cent or above to refund the value of share capital to their members or nominees or heirs of deceased members on demand,” the RBI said in a circular to UCBs. The Banking Regulation Act prohibits withdrawal or reduction in share capital by UCBs unless the RBI specifies the extent up to which and the conditions subject to which such withdrawal or reduction may take place, RBI said.

Union Road Transport & Highways and MSME Minister Nitin Gadkari had said there will be no forced privatisation of co-operative banks in order to bolster the co-operative sector.

Addressing the Loksatta Urban Co-operative Banking e-conclave, Gadkari said as a representative of the Centre and also as a representative of the people, he would act as a bridge between the co-operative banks in Maharashtra and the Finance Ministry, RBI, NABARD and the state government. Gadkari had said co-operative banks must compete with private banks to make an impression on lawmakers in Delhi. Gadkari added while privatisation of co-operative banks has been discussed since 1996, neither the central government nor the RBI has ever forcefully imposed it on the banks. Parliament passed amendments to the Banking Regulation Act in September 2020, bringing co-operative banks under the RBI’s supervision.