Invest Ment Master Circular of Cooperative Bank

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Master Circular on Investments by Primary (Urban) Co-operative Banks (Updated up to June 30, 2008)
(The Master Circular is also available at RBI website www.mastercirculars.rbi.org.in and may be down loaded from there)

RESERVE BANK OF INDIA Urban Banks Department, Central Office Mumbai

RBI/2008-09/57 UBD.BPD. (PCB). MC.No /16.20.000/2008-09 July 1, 2008

Chief Executive Officers of All Primary (Urban) Co-operative Banks Dear Sir, Master Circular on Investments by Primary (Urban) Co-operative Banks Please refer to our Master Circular UBD.BPD.(PCB).MC.No.2/16.20.00/2007-08 dated July 2, 2007 on the captioned subject (available at RBI website www.rbi.org.in). The enclosed Master Circular

consolidates and updates all the instructions/guidelines on the subject upto June 30, 2008.

Yours faithfully,

(A.K.Khound) Chief General Manager In-charge

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Master Circular on Investments by Primary (Urban) Co-op. Banks Contents 1 2 3 4 5 6 7. 8. 9 10 11 12. 13 14 15 16 17 18 Annex I II III Certain clarifications regarding brokers’ limits………………………………….…42 Definitions of certain terms used for non-SLR Debt Securities ………………...44 Disclosure requirements for non-SLR investments………………………………45 Restrictions On Holding Shares in Other Co-operative Societies…………...1 Statutory (SLR) Investments…………………………………………………….2 Investment Policy…………………………………………………………………4 General Guidelines………………………………………………………………..4 Transactions through SGL Accounts…………………………………………….9 Use of Bank Receipts (BRs)……………………………………………………..11 Engagement of brokers…………………………………………………………..13 Settlement of Government Securities Transactions through CCIL…………14 Trading of Government Securities on Stock Exchanges……………………..16 Ready forward contracts in Govt. Securities…………………………………..18 Uniform Accounting for Repo/Reverse Repo transaction…………………….21 Non SLR Investments ……………………………………………………………24 Internal Control and Investment Accounting……………………………………30 Recommenations of Ghosh Committee……………………………………..….31 Categorisation of Investments……………………………………………..…….32 Valuation of Investments……………………………………………………..…..34 Investment Fluctuation Reserve (IFR)………………………………………..…40 Reporting ………………………………………………………………………..…41

Appendix: A: B: List of circulars consolidated in the Master Circular on Investments by primary urban co-operative banks……………………………..46 List of other circulars from which instructions relating to investments have been consolidated in the Master Circular ………………….52 ******

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Master Circular on Investments by Primary (Urban) Co-operative Banks

1 1.1

RESTRICTIONS ON HOLDING SHARES IN OTHER CO-OPERATIVE SOCIETIES Section 19 of the Banking Regulation Act, 1949 (as applicable to co-operative societies) stipulates that no co-operative bank shall 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. However nothing contained in the section applies to -

1.1.1 shares acquired through funds provided by the state government for that purpose; 1.1.2 in the case of a central co-operative bank, the holding of shares in the state co-operative bank to which it is affiliated; and 1.1.3 in the case of a primary (urban) co-operative bank ( pcb), holding of shares in the central co-operative bank to which it is affiliated or in the state co-operative bank of the state in which it is registered. 1.2 In pursuance of the powers conferred by section 19 read with section 56 of he said Act, the Reserve Bank has specified that the extent and conditions subject to which cooperative banks may hold shares in any other co-operative society shall be as follows:

1.2.1 The total investments of a co-operative bank in the shares of co-operative institutions, other than those falling under any of the categories stated at paras 1.1.1 to 1.1.3 above, shall not exceed 2 per cent of its owned funds (paid-up share capital and reserves). 1.2.2 The investment of a bank in the shares of any one...
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