Originally Posted by abhishreshthaa
i. In terms of Section 23 of B.R.Act, 1949 (AACS) the RBI has the authority to issue a branch license to an urban cooperative bank and under the existing policy, RBI issues branch license after convincing itself about the financial strength of the UCB.
Strangely, in some states, the UCBs are required to obtain "No Objection Certificate" (NOC) from RCS of the concerned State even after the license has been granted by the RBI.
The Committee fails to understand the necessity of a NOC from the Registrar of Cooperative Societies. The Committee feels that grant of license is purely a banking related function and should be left to the Reserve Bank.
ii. Another area of concern arising out of dual control is investment of surplus funds by UCBs. Hence UCBs should, subject to the guidelines issued by the Reserve Bank, have the freedom to choose the products in which they may invest.
Yet, some Registrars of Cooperative Societies insist on their permission being taken for every investment decision. Due to limited avenues of profitable investments in the cooperative sector, the RBI has allowed UCBs to invest upto 10% of their surplus funds in the equity of All India Financial Institutions, units of UTI, and PSU bonds.
iii. The Reserve Bank is empowered to give direction to a cooperative bank regarding "the rate of interest and other terms and conditions on which advances or other financial accommodations may be made or guarantees may be issued…….there are instances where a RCS issued a direction that UCBs should charge interest on deposits in accordance with his instructions.
iv. Area of operation is again a matter closely related to the banking business and should, therefore, remain in the domain of the RBI
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