UCBs are now permitted by the RBI to raise share capital, by way of issue of shares to persons and issue of additional shares to existing members. UCBs are also permitted to issue preference shares and debt instruments to augment their capital. The guidelines governing the instruments are issued respectively. The extant instructions for UCBs on the issue and regulation of capital funds have been reviewed.
To enhance investor education on the risk characteristics of regulatory capital requirements, UCBs shall adhere to certain conditions. For floating rate instruments, banks should not use their fixed deposit rate as a benchmark.
Borrowings from UCBs are linked to shareholdings of the borrowing members on specified terms. The share-linking to borrowing norms shall be discretionary for UCBs which meet the minimum regulatory CRAR criteria of 9% and a Tier 1 CRAR of 5.5% as per the latest audited financial statements and the last CRAR as assessed by RBI during the statutory inspection. Such UCBs shall have a board-approved policy on share-linking to borrowing norms, which shall be implemented in a transparent, consistent and non-discriminatory manner. The policy may be reviewed by the board at the beginning of the accounting year. These instructions shall come into force with immediate effect, the RBI stated in a release.
