UPSC Prelims 2021 Question:

With reference to 'Urban Cooperative banks' in India

consider the following statements:

1. They are supervised and regulated by local boards set up by the State Governments. 
2. They can issue equity shares and preference shares. 
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.
    

Which of the statements given above is/are correct?

Explanation:

The Banking Regulation (Amendment) Bill, 2020: 

• As per the provisions of the bill, Urban Cooperative Banks (UCBs) are under the supervision and regulation of the Reserve Bank of India (RBI). ​So, statement 1 is not correct.
  
  
• The Bill enables co-operative banks to issue equity shares to members and to persons residing within the banks’ area of operation. ​It will also be permitted to raise Tier-I and Tier-II capital by issuing Perpetual Non-Cumulative Preference Shares (PNCPS), Perpetual Cumulative Preference Shares (PCPS), Redeemable Non-Cumulative Preference Shares (RNCPS) and Redeemable Cumulative Preference Shares (RCPS). So, statement 2 is correct.
  
  
• Large cooperative banks with paid-up share capital and reserves of Rs.1 lakh were brought under the purview of the Banking Regulation Act 1949 with effect from 1st March, 1966 and within the ambit of the Reserve Bank’s supervision. The UCBs were included in this. ​So, statement 3 is correct.
  
  

Therefore, option (2) is the correct answer.

Relevance: RBI proposes tweaks to capital-raising guidelines for urban co-op banks

Subject: Economics | Money and Banking