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RBI/2016-17/57
DCBR.BPD (PCB).BC.No.3/12.05.001/2016-17
September
1, 2016
The Chief Executive Officers
Salary Earners Primary (Urban) Co-operative Banks
Dear Sir/Madam,
Advances against Term Deposits
of Non-members
In terms of our circular
UBD.No.BL.(SEB)5A/07.01.00-2001/02 dated August 8, 2001, Salary Earners’
Primary (Urban) Co-operative Banks (SEBs) applying for permission to open
branches should ensure, inter alia, that their byelaws do not contain
provisions for giving loans to outsiders (non-employees) by enrolling them
as members / nominal members.
2. Pursuant to the deliberations
in the 32nd Standing Advisory Committee meeting held on December 14, 2015,
it has been decided to permit SEBs to grant advances against term deposits
of non-members, subject to the following conditions:
(i) The SEB should be fulfilling
all the criteria for financially sound and well managed (FSWM) UCBs laid
down in our circulars UBD.CO.LS (PCB)
Cir.No.20/07.01.000/2014-15 and DCBR.
CO.LS (PCB) Cir.No.4/07.01.000/2014-15 dated October 13, 2014
and January 28, 2015 respectively.
(ii) The SEB should have in
place an Audit Committee of the Board of Directors which is constituted and
functioning in compliance with the instructions contained in our circular
UBD.No.Plan.(PCB).9/09.06.00-94/95 dated July 25, 1994.
(iii) The bye-laws of SEB should
have a provision for giving loans to non-members against term deposits held
in their own name singly or jointly with other non-members/ members.
(iv) The SEB should maintain a
reasonable margin against such advances at all times as per the policy
approved by its Board.
(v) No credit facilities, other
than advances against term deposits, shall be granted to non-members.
3. All other conditions
prescribed in the circular UBD.No.BL(SEB)5A/07.01.00-2001/02 dated August
8, 2001 remain unchanged.
Yours faithfully,
(A.G. Ray)
General Manager-in-charge
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