Restrictions for UCB

abhishreshthaa

New member
RESTRICTIONS

Cooperatives are subject to following restrictions:

Restriction on holding shares in other co-operative societies:

No co-operative bank is permitted to hold shares in any other co-operative society except to such extent and subject to such conditions as the Reserve Bank may specify in that behalf.


Restrictions on loans and advances:


1. No co-operative bank can –

a) Make any loans or advances on the security of its own shares; or

b) Grant unsecured loans or advances –

i. To any of its directors; or

ii. To firms or private companies in which any of its directors is interested as partner or managing agent or guarantor or to individuals in cases where any of its directors is a guarantor; or

iii. To any company in which the chairman of the Board of directors of the co-operative bank (where the appointment of a chairman is for a fixed term) is interested as its managing agent, or where there is no managing agent, as its chairman or managing director;

Provided that nothing in clause (b) shall apply to the grant of unsecured loans or advances –

a) Made by a co-operative bank

i) Against bills for supplies / services made to Government or bills of exchange arising out of bonafide commercial / trade transactions, or

ii) In respect whereof trust-receipts are furnished to the co-operative banks;

Or Made by a primary co-operative bank to any of its directors or to any other person within such limits and on such terms and conditions as may be approved by the Reserve Bank in this behalf.

2. Every co-operative bank shall, before the close of the month, submit to the Reserve Bank a return in the prescribed form and manner showing all unsecured loans and advances granted by it to companies in cases in which any of its directors is interested as director or managing agent or guarantor.


3. If on examination of any return submitted as above, it appears to the Reserve Bank that any loans or advances referred to it in that case are being granted to the detriment of the interests of the depositors of the co-operative bank, the Reserve Bank can prohibit the co-operative bank from granting any such further loans or advances or impose such restrictions on the grant thereof as it thinks fit, and may direct the co-operative bank to secure the repayment of any such loan or advance within such time as may be specified in that order.



Restriction on power to remit debts –

A co-operative bank shall not, except with the prior approval of the Reserve Bank, remit debt due to it by any of its past or present directors, or any firm or company in which any of its directors is interested as director, partner, managing agent or guarantor.


Rate of interest charged by co-operative banks not to be subject to scrutiny by courts.

Notwithstanding anything contained in the Usurious Loans Act, 1918, or any other law relating to indebtedness in force in any State, transaction between a co-operative bank and its debtor shall not be re-opened by any court on the ground that the rate of interest charged by the co-operative bank in respect of such transaction is excessive.


Licensing of co-operative banks:

1. No co-operative society can carry on banking business in India unless:

a) It is a primary credit society, or

b) It is co-operative bank and holds a license issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fir to impose.


Nothing in this sub-section is applied to a co-operative society, carrying on banking business at the commencement of the Business Laws (Application to Co-operative Societies) Act, 1965, for a period of one year from such commencement.


Restrictions on opening of new, and transfer of existing places of business:


1. Without obtaining the prior permission of the Reserve Bank, no co-operative bank can open a new place of business or change otherwise than within the same city, town or village unless in case of the following :


a) the opening for a period not exceeding one month of a temporary place of business within which the co-operative bank already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a mela or any other like occasion;


b) the opening or changing the location of branches by a central co-operative bank within the area of its operation.


2. Before granting any permission, the Reserve Bank may require to be satisfied by an inspection as to the financial condition and history of the co-operative bank, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location of the place of business.


If in the opinion of the Reserve Bank, a co-operative bank has, at any time, failed to comply with any of the conditions imposed on it, it can revoke any permission granted under this section.


Any co-operative bank other than a primary co-operative bank requiring the permission of the Reserve Bank, shall forward its application to the Reserve bank through the national bank.



Maintenance of a percentage of assets:

Every co-operative bank has to maintain in India in cash, gold or unencumbered approved securities, values at a price not exceeding the current market price, an amount which is not at the close of business on any day be less than 25 percent of the total of its demand and time liabilities in India.


For the purposes of this section, ‘unencumbered approved securities’ of a co-operative bank includes its approved securities lodged with also another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of.




Return of unclaimed deposits:
Every co-operative bank has to within thirty days after the close of each calendar year, submit a return in the prescribed form and manner to the Reserve Bank of all accounts in India which have not been operated upon for ten years;



Power of the Reserve Bank to give directions:

1. Where the Reserve Bank is satisfied that:

In the public interests; or in the interest of banking policy; or to prevent the affairs of any co-operative bank being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the co-operative bank; or to secure the proper management of the banking business of any co-operative bank generally; it is necessary to issue directions to co-operative banks generally or to any co-operative bank in particular,


it may, from time to time, issue such directions as it deems fit, and the co-operative banks or the co-operative bank, as the case may be, shall be bound to comply with such directions.


The Reserve Bank may in representation made to it or on its own motion, modify or cancel any direction issued and in so modifying or canceling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.


2. The Reserve Bank may:

a) Caution or prohibit co-operative banks generally or any co-operative bank in particular against entering into any particular transaction and generally give advice to any co-operative bank.


b) give assistance to any co-operative bank by means of the grant of a loan or advance to it under Reserve Bank of India Act, 1934;


c) at any time if it is satisfied that for the reorganization or expansion of co-operative credit on sound lines it is necessary so to do, by an order in writing and on such terms and conditions as may be specified therein.


i) Depute one or more of its officers to watch the proceedings of any meeting of the Board of Directors of the co-operative bank or of any other body constituted by it and require the co-operative bank to give an opportunity to the officer so deputed to be heard at such meetings and to offer such advice on such matters as the officer may consider necessary or proper for the organisation and expansion of co-operative credit on sound lines, and require such officer to send a report of such proceedings to the Reserve Bank;


ii) Appoint one or more of its officers to observe the manner in which the affairs of the co-operative bank of its offices or branches are being conducted and make a report thereon;


Power of Reserve Bank to apply to Central Government by a co-operative bank:
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The Reserve Bank may apply to the Central Government for an order of moratorium or for suspension of business in respect of a co-operative bank.

The Central Government, after considering the application made by the Reserve Bank may make an order of moratorium staying the commencement or continuance of all actions and proceedings against the co-operative bank for a fixed period of time on such terms and conditions as it thinks fit an proper and may from time to time extend the period so however that the total period of moratorium shall not exceed six months.
 

bhautik.kawa

New member
RESTRICTIONS

Cooperatives are subject to following restrictions:

Restriction on holding shares in other co-operative societies:

No co-operative bank is permitted to hold shares in any other co-operative society except to such extent and subject to such conditions as the Reserve Bank may specify in that behalf.


Restrictions on loans and advances:


1. No co-operative bank can –

a) Make any loans or advances on the security of its own shares; or

b) Grant unsecured loans or advances –

i. To any of its directors; or

ii. To firms or private companies in which any of its directors is interested as partner or managing agent or guarantor or to individuals in cases where any of its directors is a guarantor; or

iii. To any company in which the chairman of the Board of directors of the co-operative bank (where the appointment of a chairman is for a fixed term) is interested as its managing agent, or where there is no managing agent, as its chairman or managing director;

Provided that nothing in clause (b) shall apply to the grant of unsecured loans or advances –

a) Made by a co-operative bank

i) Against bills for supplies / services made to Government or bills of exchange arising out of bonafide commercial / trade transactions, or

ii) In respect whereof trust-receipts are furnished to the co-operative banks;

Or Made by a primary co-operative bank to any of its directors or to any other person within such limits and on such terms and conditions as may be approved by the Reserve Bank in this behalf.

2. Every co-operative bank shall, before the close of the month, submit to the Reserve Bank a return in the prescribed form and manner showing all unsecured loans and advances granted by it to companies in cases in which any of its directors is interested as director or managing agent or guarantor.


3. If on examination of any return submitted as above, it appears to the Reserve Bank that any loans or advances referred to it in that case are being granted to the detriment of the interests of the depositors of the co-operative bank, the Reserve Bank can prohibit the co-operative bank from granting any such further loans or advances or impose such restrictions on the grant thereof as it thinks fit, and may direct the co-operative bank to secure the repayment of any such loan or advance within such time as may be specified in that order.



Restriction on power to remit debts –

A co-operative bank shall not, except with the prior approval of the Reserve Bank, remit debt due to it by any of its past or present directors, or any firm or company in which any of its directors is interested as director, partner, managing agent or guarantor.


Rate of interest charged by co-operative banks not to be subject to scrutiny by courts.

Notwithstanding anything contained in the Usurious Loans Act, 1918, or any other law relating to indebtedness in force in any State, transaction between a co-operative bank and its debtor shall not be re-opened by any court on the ground that the rate of interest charged by the co-operative bank in respect of such transaction is excessive.


Licensing of co-operative banks:

1. No co-operative society can carry on banking business in India unless:

a) It is a primary credit society, or

b) It is co-operative bank and holds a license issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fir to impose.


Nothing in this sub-section is applied to a co-operative society, carrying on banking business at the commencement of the Business Laws (Application to Co-operative Societies) Act, 1965, for a period of one year from such commencement.


Restrictions on opening of new, and transfer of existing places of business:


1. Without obtaining the prior permission of the Reserve Bank, no co-operative bank can open a new place of business or change otherwise than within the same city, town or village unless in case of the following :


a) the opening for a period not exceeding one month of a temporary place of business within which the co-operative bank already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a mela or any other like occasion;


b) the opening or changing the location of branches by a central co-operative bank within the area of its operation.


2. Before granting any permission, the Reserve Bank may require to be satisfied by an inspection as to the financial condition and history of the co-operative bank, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location of the place of business.


If in the opinion of the Reserve Bank, a co-operative bank has, at any time, failed to comply with any of the conditions imposed on it, it can revoke any permission granted under this section.


Any co-operative bank other than a primary co-operative bank requiring the permission of the Reserve Bank, shall forward its application to the Reserve bank through the national bank.



Maintenance of a percentage of assets:

Every co-operative bank has to maintain in India in cash, gold or unencumbered approved securities, values at a price not exceeding the current market price, an amount which is not at the close of business on any day be less than 25 percent of the total of its demand and time liabilities in India.


For the purposes of this section, ‘unencumbered approved securities’ of a co-operative bank includes its approved securities lodged with also another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of.




Return of unclaimed deposits:
Every co-operative bank has to within thirty days after the close of each calendar year, submit a return in the prescribed form and manner to the Reserve Bank of all accounts in India which have not been operated upon for ten years;



Power of the Reserve Bank to give directions:

1. Where the Reserve Bank is satisfied that:

In the public interests; or in the interest of banking policy; or to prevent the affairs of any co-operative bank being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the co-operative bank; or to secure the proper management of the banking business of any co-operative bank generally; it is necessary to issue directions to co-operative banks generally or to any co-operative bank in particular,


it may, from time to time, issue such directions as it deems fit, and the co-operative banks or the co-operative bank, as the case may be, shall be bound to comply with such directions.


The Reserve Bank may in representation made to it or on its own motion, modify or cancel any direction issued and in so modifying or canceling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.


2. The Reserve Bank may:

a) Caution or prohibit co-operative banks generally or any co-operative bank in particular against entering into any particular transaction and generally give advice to any co-operative bank.


b) give assistance to any co-operative bank by means of the grant of a loan or advance to it under Reserve Bank of India Act, 1934;


c) at any time if it is satisfied that for the reorganization or expansion of co-operative credit on sound lines it is necessary so to do, by an order in writing and on such terms and conditions as may be specified therein.


i) Depute one or more of its officers to watch the proceedings of any meeting of the Board of Directors of the co-operative bank or of any other body constituted by it and require the co-operative bank to give an opportunity to the officer so deputed to be heard at such meetings and to offer such advice on such matters as the officer may consider necessary or proper for the organisation and expansion of co-operative credit on sound lines, and require such officer to send a report of such proceedings to the Reserve Bank;


ii) Appoint one or more of its officers to observe the manner in which the affairs of the co-operative bank of its offices or branches are being conducted and make a report thereon;


Power of Reserve Bank to apply to Central Government by a co-operative bank:
qa

The Reserve Bank may apply to the Central Government for an order of moratorium or for suspension of business in respect of a co-operative bank.

The Central Government, after considering the application made by the Reserve Bank may make an order of moratorium staying the commencement or continuance of all actions and proceedings against the co-operative bank for a fixed period of time on such terms and conditions as it thinks fit an proper and may from time to time extend the period so however that the total period of moratorium shall not exceed six months.

Hey Buddy,

I also got some information on the RBI Inspection of Urban Co-operative Banks under B.R. Act 1949 (AACS) and would like to share it with you and other student's. So please download and check it.
 

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