 "Norms for new capital instruments for Urban Cooperative Banks on anvil")
The norms for new capital-raising instruments, such as issuance of shares at a premium for urban cooperative banks (UCBs), are expected to provide flexibility in raising resources and support growth of the sector.
These norms will be outlined in the Reserve Bank of India’s (RBI’s) discussion paper.
RBI Governor Shaktikanta Das stated that to provide more flexibility and avenues for UCBs to raise capital, the discussion paper will be issued for feedback and suggestions from stakeholders.
The RBI said the initial set of guidelines on the issue and regulation of share capital and securities for UCBs were issued in 2022 to ensure alignment with the Banking Regulation (Amendment) Act, 2020.
However, these guidelines did not cover the newly-enabled capital-related provisions, the RBI said in a statement on developmental and regulatory policies accompanying the monetary policy review.
Prabhat Chaturvedi, chief executive officer (CEO), National Urban Co-operative Finance and Development Corporation (NUCFDC), said that focusing on capital-raising options is vital for stability and growth of these institutions.
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The regulator is working to make UCBs an integral part of the Indian financial ecosystem. It is working to boost their competitiveness, and maximise their capacity to serve customers.
An expert panel on UCBs, headed by former deputy governor N S Vishwanathan in 2021, had provided broad guiding principles through its recommendations on these provisions.
The RBI had appointed a working group to operationalise the broad-based recommendations of the expert committee on the newly-enabled capital-related provisions.
The Vishwanathan panel had recommended examining the feasibility of issuing redeemable preference shares with a very low coupon and a maturity of 20 years. This could be without accompanying voting rights.