With reference to ‘Urban Cooperative Banks’ in India, consider the following statements:
1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an amendment in 1966.
Which of the statements given above is/are correct?
Explanation
Statement 1 is incorrect: Urban Cooperative Banks are subject to dual regulation: administrative functions (registration, governance, elections) are overseen by the Registrar of Cooperative Societies (RCS), while core banking operations, licensing, and prudential norms are strictly regulated and supervised by the Reserve Bank of India (RBI), not by state local boards.
Statement 2 is correct: Following the Banking Regulation (Amendment) Act, 2020, UCBs are permitted to raise capital by issuing equity shares, preference shares, and special shares with prior approval from the RBI.
Statement 3 is correct: Cooperative banks were brought under the regulatory domain of the Banking Regulation Act, 1949 with effect from March 1, 1966, by incorporating Section 56 into the Act.
Hence, statements 2 and 3 are correct — Option B.