RBI/2004-05/ 367 UBD.BPD(PCB).MC.No. 16 /16.20.00/2004-05, DT. 18/02/2005

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

Annexure I

Master Circular on Investments Certain clarifications on brokers’ limits

[Ref: Para 7.3]

Sr.No.	Issue raised	Response
1.	The year should be calendar year or financial year?	Since banks close their accounts at the end of March, it may be more convenient to follow the financial year. However, the banks may follow calendar year or any other period of 12 months provided, it is consistently followed in future.
2.	Whether to arrive at the total transactions of the year, transactions entered into directly with counter-parties, i.e. where no brokers are involved would also be taken into account?	Not necessary. However, if there are any direct deals with the brokers as purchasers or sellers the same would have to be included in the total transactions to arrive at the limit of transactions to be done through an individual broker.
3.	Whether in case of ready forward deals both the legs of the deals i.e. purchase as well as sale will be included to arrive at the volume of total transactions?	Yes
4.	Whether central loan/state loan/treasury bills etc. purchased though direct subscriptions/auctions will be included in the volume of total transactions?	No, as brokers are not involved as intermediaries.
5.	It is possible that even though bank considers that a particular broker has touched the prescribed limit of 5%, he may come with an offer during the remaining period of the year which the bank may find to its advantage as compared to offers received from the other brokers who have not yet done business upto the prescribed limit.	If the offer received is more advantageous the limit for the broker may be exceeded and the reasons therefore recorded and approval of the competent authority/Board obtained post facto.
6.	Whether the transactions conducted on behalf of the clients would also be included in the total transactions of the year?	Yes, if they are conducted through the brokers.
7.	For a bank which rarely deals through brokers and consequently the volume of business is small maintaining the brokewise limit of 5% may mean splitting the orders in small values amongst different brokers and there may also arise price differential.	There may be no need to split an order. If any deal causes, the particular broker's share to exceed 5% limit, our circular provides the necessary flexibility inasmuch as Board's postfacto approval can be obtained.
8.	During the course of the year, it may not be possible to reasonably predict what will be the total quantum of transactions through brokers as a result of which there could be deviation in complying with the norm of 5%.	The bank may get postfacto approval from the Board after explaining to it, the circumstances in which the limit was exceeded.
9.	Some of the small private sector banks have mentioned that where the volume of business particularly, the transactions done through brokers is small the observance of 5% limit may be difficult. A suggestion has, therefore, been made that the limit may be required to be observed if the business done through a broker, exceeds a cut-off point of say Rs.10 crores.	As already observed the limit of 5% can be exceeded subject to reporting the transactions to the competent authority post facto. Hence, no change in instructions are considered necessary.
10.	Whether the limit is to be observed with reference to total transactions of the previous year as the total transactions of the current year would be known only at the end of the year?	The limit has to be observed with reference to the year under review. While operating the limit, the bank should be in view the expected turnover of the current year which may be based on turnover of the previous year and anticipated rise or fall in the volume of business in the current year.

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Annexure II

Master Circular on Investments - Certain Definitions

[ Vide para 12.3.1(iii) ]

1. With a view to imparting clarity and to ensure that there is no divergence in the implementation of the guidelines, some of the terms used in the guidelines are defined below.

2. A security will be treated as rated if it is subjected to a detailed rating exercise by an external rating agency in India which is registered with SEBI and is carrying a current or valid rating. The rating relied upon will be deemed to be current or valid if:

i. the credit rating letter relied upon is not more than one month old on the date of opening of the issue, and

ii. the rating rationale from the rating agency is not more than one year old on the date of opening of the issue, and

iii. the rating letter and the rating rationale is a part of the offer document.

iv. In the case of secondary market acquisition, the credit rating of the issue should be in force and confirmed from the monthly bulletin published by the respective rating agency.

v. Securities which do not have a current or valid rating by an external rating agency would be deemed as unrated securities.

3. The investment grade ratings awarded by each of the external rating agencies operating in India would be identified by the IBA/ FIMMDA. These would also be reviewed by IBA/ FIMMDA at least once a year.

4. A ‘listed’ debt security is a security which is listed in a stock exchange. If not so, it is an ‘unlisted’ debt security.

5. A non performing investment (NPI), similar to a non performing advance (NPA), is one where

a. Interest/ instalment (including maturity proceeds) is due and remains unpaid for more than 180 days. The delinquency period has become 90 days with effect from 31st March 2004.

b. if any credit facility availed by the issuer is NPA in the books of the bank, investment in any of the securities issued by the same issuer would also be treated as NPI.

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Annexure III

Master Circular on Investments List of All India Financial Institutions
[Vide para 12.3.4.1 (ii)]

1. IFCI Ltd.
2. Industrial Investment Bank of India Ltd.
3. Tourism Finance Corporation of India Ltd.
4. Risk Capital and Technology Finance Corporation Ltd.
5. Technology Development and Information Company of India Ltd.
6. Power Finance Corporation Ltd.
7. National Housing Bank.
8. Small Industries Development Bank of India
9. Rural Electrification Corporation Ltd.
10. Indian Railways Finance Corporation Ltd.
11. National Bank for Agriculture and Rural Development.
12. EXIM Bank of India.
13. Infrastructure Development Finance Co. Ltd.

--------------------------------------------------------------------------------Annexure IV

Master Circular on Investments Disclosures Requirements

[ Vide para 12.9 ]

i) Issuer composition of Non SLR investments

(Rs. in crore)

No. 1.	Issuer 2.	Amount 3.	Extent of ‘below investment grade’ Securities 4.	Extent of ‘unrated’ securities 5.	Extent of ‘unlisted’ securities 6.
1	PSUs
2	FIs
3	Nationalised Banks
4	Others
5	Provision held towards depreciation		X X X	X X X	X X X
	Total *

NOTE: 1.* Total under column 3 should tally with the total of investments in Schedule 8 to the balance sheet:

2. Amounts reported under columns 4, 5, and 6 above may not be mutually exclusive.

ii) Non performing Non-SLR investments

Particulars	Amount (Rs. Crore)
Opening balance
Additions during the year since 1st April
Reductions during the above period
Closing balance
Total provisions held

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Appendix

Master Circular on Investments by Primary (urban) Co-op. Banks

A. List of Circulars consolidated in the Master Circular

No.	Circular No.	Date	Subject
1.	UBD.BPD.SUB.CIR.5/09.80.00/2003-04	28-04- 2004	Transactions in Government Securities (DVP III)
2.	UBD.BPD.PCB.Cir.45/16.20.00/2003-04	15-04- 2004	Investment in non-SLR debt securities by UCBs
3.	UBD.BPD.PCB.Cir.44/09.29.00/2003-04	12-04- 2004	Sale of Govt. Securities allocated during the auctions for primary issues on the same day.
4.	UBD.BPD.PCB.Cir.42/09.11.00/2003-04	1-04- 2004	Maintenance of CSGL Accounts
5.	UBD.BPD.PCB.Cir.35/13.05.00/2003-04	27-02-2004	Placement of deposits by NSCBs with strong sch UCBs
6.	UBD.BPD.PCB.Cir.34/13.05.00/2003-04	11-02-2004	Maximum limit on advances-limits on exposure to individual/group borrowers-Computation of capital funds
7.	UBD.BPD.PCB.Cir.33/09.11.00/2003-04	11-02-2004	Maintenance of CSGL Accounts
8.	UBD.BPD.PCB.FIR.26/16.20.00/2003-04	2-12-2004	Investment in shares of ICICI Bank Ltd.
9.	UBD.BPD.PCB.Cir.12/09.29.00/2003-04	04-09-2003	Investment Portfolio of UCBs-Guidelines for Investment Fluctuation Reserve
10.	UBD.BPD.Cir.No.11/09.29.00/2003-04	02-09-2003	Investment Portfolio of UCBs-Classification & Valuation of investments
11.	UBD.BPD.PCB.Cir.8/9.2900/2003-04	16-08-2003	Trading of Government Securities in Stock Exchanges
12.	UBD.BPD.Cir.No.1/09.11.00/2003-04	08-07-2003	Settlement in respect of Government Securities Transaction-Compulsory settlement through CCIL
13	UBD.BPD.PCB.Cir.No.2/09.80.00/2003-04	08-07-2003	Scheme for Non-Competitive Bidding Facility in the Auction of Government of India dated securities
14.	UBD.PCB.56/09.29.00/2003-04	02-07-2003	Investment Portfolio of Banks-Transactions in Securities
15.	UBD.BPD.PCB.Cir.No.46/16.20.00/2002-03	17-05-2003	Placement of deposits by non-scheduled UCBs with Scheduled UCBs
16.	UBD.BPD.PCB.No.44/09.80.00/2002-03	12-05-2003	Guidelines for uniform accounting for Repo/Reverse Repo transactions
17.	UBD.BPD.PCB.Cir.No.39/09.29.00/2002-03	13.03.2003	Trading of Government Securities on Stock Exchange
18	UBD.BP.No.35/16.26.00/2002-03	18-02-2003	Prices of Government Securities in the Secondary Market
19	UBD.BPD.SPCB.Cir.No.9/09.29.00/2002-03	27-01-2003	Reconciliation Procedure for Government Loans
20	UBD.POT.PCB.Cir.No.06/09.29.00/2002-03	06-08-2002	Investment Portfolio of UCBs-Transactions in Government Securities
21	UBD.POT.PCB.Cir.No.5/09.29.00/2002-03	22-07-2002	Investment portfolio of banks-transaction in securities
22	UBD.POT.No.49/09.80.00/2001-02	17-06-2002	Ready Forward Contracts
23	UBD.CO.POT.PCB.Cir.No.48/09.29.00/2001-02	11-06-2002	Certification of holding of securities in banks’ investment portfolio
24	UBD.BR.No.47/16.26.00/2001-02	07-06-2002	Investments in Government and other approved securities by Urban Co-op Banks
25	UBD.PCB.Cir.No.46/09.29.00/2001-02	06-06-2002	Investment Portfolio of Banks-Transaction in Securities
26	UBD.Plan.SCB.Cir.No.10/09.29.00/2001-02	26-04-2002	Investment Portfolio of Urban Banks-Transactions in Government Securities
27	UBD.Plan.PCB.Cir.No.41/09.29. 00/2001-02	20-04-2002	Investment Portfolio of Banks-Transactions in Securities
28	UBD.BR.Cir.No.19/16.26.00/2001-02	22-10-2001	B,R.Act, 1949 (AACS) Section 24-Investment in Government and other approved securities
29	UBD.No.BR.6/16.26.00/2000-01	09-08-2001	B.R. Act, 1949 (AACS) Section 24-Investment in Government and other approved securities
30	UBD.No.CO.BSD.I.PCB.44/12.05.05/2000-2001	23-04-2001	Guidelines for Classification and Valuation of Investments by Banks
31	UBD.No.BR.Cir/42/16.26.00/2000-01	19-04-2001	Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) - Section 24 - Investment in Government and other approved Securities by Urban Co-operative Banks (UCBS)
32	UBD.No.43/16.20.00/2000-01	19-04-2001	Investment of Funds by Urban Co-operative Banks as deposits with other institutions and other Urban Co-operative Banks
33	UBD.No.POT.Cir.PCB.39/09.29.00/ 2000	18-04-2001	Sale of Government Securities Allotted in the Auctions of Primary Issues
34	UBD.No.Plan.PCB.Cir/22/09.29.00/ 2000-2001	30-12-2000	Investment Portfolio of banks - Transactions in securities - Role of brokers
35	UBD.Plan.PCB.Cir/26/09.80.00/99-2000	28-03-2000	Ready Forward Contracts
36	UBD.Plan.18/09.80.00/1999-2000	30-12-1999	Banks' own investment in State Government Loans -Payment of brokerage commission
37	UBD.No.Plan.PCB.04/09.80.00/99-2000	25-08-1999	Ready Forward Transactions
38	Ref. UBD No.BR. 26/18.20.00/98-99	07-04-1999	Investment of funds by primary (urban) co-operative banks In public sector undertakings/ companies
39	UBD.No.Plan.PCB.DIR.3/09.80.00/98-99	17-08-1998	Reverse Ready forward transactions
40	UBD.No.BR.1/16.20.00/98-99	10-07-1998	Investment by urban co-op. banks-Valuation of Investments-US-64 units
41	UBD No.61/16.20.00/97-98	04-06-1998	Investment of Investment by Urban Cooperative Banks - Valuation of Investment - US- 64 Units funds by primary (urban) co-operative banks in public sector undertakings/companies
42	UBD.No.Pl.an.PCB/Cir.56/09.60.00/ 97-98	13-05-1998	Investment in Certificates of Deposit (CDs) by primary (urban) co-operative banks
43	UBD.No.Plan.SUB.20/09.81.00/97-98	19-02-1998	Retailing of Government Securities
44	UBD.No.BP.37/16.20.00/97-98	29-01-1998	Investment by Urban Co-operative Banks - Valuation of Investments
45	UBD.No.BSD.I (PCB) 22/ 12. 05. 00 / 97-98	26-11-1997	Investment by Urban Co-operative Banks Valuation of Investments
46	UBD.No.Plan.SUB.No.17/09.83.00/97-98	19-11-1997	Statistical data relating to investments in Money Market Instruments/Government Securities
47	UBD.No.Plan.PCB/Cir.21/09.60.00/97-98	11-11-1997	Investment in certificates of deposit (CDs) by Urban Co-operative Banks
48	UBD.No.Plan.PCB.Cir.19/09.29.00/97-98	10-11-1997	Investment Portfolio of banks-Transactions in securities-Role of brokers
49	UBD.No.Plan.PCB.56/09.60.00/96-97	06-06-1997	Investment in Certificates of Deposit (CDs) by Urban Co-operative Banks
50	UBD.No.DS.SUB.CIR.7/13.07.00/96-97	07-01-1997	Investment of Surplus Funds by primary co-operative Banks in Bills Rediscounting Scheme
51	UBD.No.Plan.PCB.34/09.29.07/96-97	30-12-1996	Investment portfolio of banks Transactions in securities
52	UBD.No.Plan.PCB.No.30/09.82.00/96-97	27-11-1996	Investment by Urban Co-operative Banks in the Units of Unit Trust of India (UTI)
53	UBD.No.Plan.PCB.19/09.29.00/96-97	11-09-1996	Investment portfolio of banks - System for custody and control of unused B. R. Forms
54	UBD.No.Plan.PCB.7/09.60.00/96-97	19-07-1996	Investment in certificates of deposit by Urban Co-operative Banks
55	UBD.No.Plan/PCB/69/09.29.00/95-96	21-06-1996	Investment portfolio of banks - Transactions in securities
56	UBD.No.BR.Cir.52/16.20.00/95-96	16-03-1996	Investment of funds by Urban Co-operative Banks in Public Sector Undertakings/Companies
57	UBD.No.Plan.PCB.47/09.60.00/95-96	29-02-1996	Investment in Certificates of Deposit (CDs) by Urban Co-operative Banks
58	UBD.No.BR.12/16.20.00/95-96	06-01-1996	Investment of funds by urban co-operative banks in bonds of public sector undertakings
59	UBD.No.BR.Cir.33/16.26.00/95-96	03-01-1996	Banking Regulation Act, 1949 (As applicable to Co-operative Societies) Section 24-Investment in Government and other approved securities by primary co-operative banks
60	UBD.No.Cir.63/16.26.00/94-95	16-06-1995	Banking Regulation Act, 1949 (As applicable to Co-operative Societies) Section 24-Investment in Government and other approved securities by primary co-operative banks
61	UBD.No.BR.CIR.53/16.20.00/94-95	24-04-1995	Investment of funds by Urban Co-operative Banks in Public Sector Undertakings/Companies
62	UBDNo.Plan.PCB.32/09.29.00/94-95	24-11-1994	Investment Portfolio of Banks - Transactions in Securities - Bank Receipts/Role of brokers
63	UBD.No.Plan.PCB.29/09.80.00/94/95	09-11-1994	Ready Forward Transactions
64	UBD.No.Plan.PCB.14/09.80.00/94-95	24-08-1994	Ready Forward Transactions
65	UBD.BR.10/PCB(CIR)/16.20.00/9495	01-08-1994	Investment of funds by primary co-operative banks in public sector undertakings/companies
66	UBD.BR.CIR.72/16.20.00/93-94	16-05-1994	Investment of funds by urban co-operative banks in public sector undertakings/companies
67	UBD.No.PLAN (PCB).CIR.56/09.29.00/93-94	11-02-1994	Investment portfolio of banks - Transactions in Securities.
68	UBD.No.Plan.51/09.29.00/93-94	20-01-1994	Investment portfolio of banks - Transactions in Securities - Bouncing of SGL transfer forms - Penalties to be imposed:
69	UBD.No.3/09.29.00/93-94	02-08-1993	Investment port-folio of banks - Transactions in securities - Aggregate contract limit for individuals brokers-Clarifications
70	UBD.No.Plan.74/UB.81-92/93	17-05-1993	Investment portfolio or banks - Transactions in securities
71	UBD.No.Plan.13/UB.81/92-93	15-09-1992	Investments portfolio of banks Transactions in securities
72	UBD.No.BR.1866/A.12(19)-87/88	13-06-1988	Investments of Funds by Urban Co-operative Banks as Deposits with Public Sector Undertakings/ Companies/Corporations/Co-operative Institutions
73	UBD.No.DC.84 /R.1(B).87/88	13-02-1988	Bills Rediscounting Scheme - Rediscounting of Bills with Banks and Financial Institutions
74	UBD.No.BR.1455/A12(24)-85/86	31-05-1986	Banking Regulation Act, 1949 (as applicable to co-operative societies) - Section 24 - Investment in Units issued by the Unit Trust of India
75	UBD.BR.871/A.12 (24)-84/85	10-05-1985	Banking Regulation Act, 1949 (as applicable to co-operative societies) - Section 24 - Investment made under national deposit scheme
76	UBD.BR.498/A.12 (24) -84/85	08-01-1985	Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) Section 24 - Investment in Government and Other Trustee Securities by primary co-operative banks
77	UBD.NO.DC.597/R.41-84/85	31-10-1984	7% Capital Investment Bonds
78	UBD.P&O.1121/UB. -63-83/84	01-06-1984	Bank's own investment in central state government loans-payment of brokerage
79	ACD.ID (DC) 1799/R.36/79/80	10-01-1980	Subscription/purchase of 7 year national rural development bonds
80	ACD.ID. (DC) 1800/R.36-79/80	10-01-1980	Directive relating to subscription/purchase of 7 year national rural development bonds
81	ACD.BR.446/A.12 (19)/72-3	01-11-1972	Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) Section 19
82	ACD.BR.463/A.12 (19)/70-7	09-11-1970	Banking Regulation Act, 1949 (As Applicable to Co-operative Societies): Section 19
83	ACD.BR.1/A.12 (19)/68-9	01-07-1968	Section 19 of the Banking Regulation act 1949 (as applicable to co-operative societies): Restriction on holding shares in other co-operative societies
84	ACD.BR.3/A.12 (19)/68-9	01-07-1968	Section 19 of the Banking Regulation Act, 1949 (as applicable to co-operative societies): Restriction on holding shares in other co-operative societies
85	ACD.BR.903/A.12 (19)/67-8	22-12-1967	Banking Regulation Act, 1949 (as applicable to Co-operative Societies): Section 19: Restriction on holding of shares in other co-operative societies
86	ACD.BR.388/A.11 (19) 65-6	01-03-1966	Section 19 of the Banking Regulation Act: Restriction on holding shares in other co-operative societies

B. List of Other Circulars from which instructions relating to Investments have also been consolidated in the Master Circular

No.	Circular No.	Date	Subject
	UBD.No.POT.PCB.Cir.No.45/09.116.00/2000-01	25-04-2001	Application of Capital Adequacy Norms to Urban (Primary) Co-operative Banks
	UBD.CO.No.BSD-I.PCB(Cir)34/ 12.05.05/99-2000	24-05-2000	Income Recognition, Asset Classification, Provisioning and Valuation of Investments
	UBD.No.BSD.PCB./25/12.05.05/ 99-2000	28-02-2000	Income Recognition, Asset Classification, Provisioning and other related matters
	UBD.No.I&L(PCBs)42/12.05.00/ 96-97	20-03-1997	Prudential norms - Income Recognition, Assets Classification, Provisioning and other related matters -
	UBD.No.I&L(PCBs)68/12.05.00/ 95-96	10-06-1996	Income Recognition, assets classification, provisioning and other related matters Clarifications
	UBD.No.I&L(PCB)61/12.05.00/94-95	06-06-1995	Income recognition, asset classification, provisioning and other related matters Valuation of investment and others
	UBD.No.I&L86/12.05.00/93-94	28-06-1994	Income recognition, assets classification, provisioning and other related matters
	UBD.21/12:15:00/93-94	21-09-1993	Committee to enquire into various aspects relating to frauds and malpractices in banks primary (urban) co-operative banks
	UBD.NO.I&L.38/J.1-92/93	09-02-1993	Income recognition, assets classification, provisioning and other related matters
	UBD.BR.16/A.6-84/85	09-07-1984	Banking Law (Amendment) Act, 1983
	ACD.Plan.358/UB.1-78/9	20-04-1979	Report on the committee on urban co-operative banks
	ACD.BR.184/A.12(19)-78/9	23-08-1978	The Banking Regulation Act, 1949 (as applicable to co-operative societies) : Section 10 : Restriction on holding shares in other co-operative societies
	ACD.BR.760/A.1/68-9	23-01-1969	The Banking Laws (Amendment) Act, 1968
	ACD.BR. 464/A. 12(24)/68-9	12-11-1968	Section 24 of the Banking Regulation Act 1949 (As Applicable to Co-operative Societies): Maintenance of Percentage of Assets

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