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?

1. 1 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2 and 3

Explanation

Statement 1 is incorrect

• UCBs are financial institutions registered as cooperative societies under the State Cooperative Societies Act or the Multi-State Cooperative Societies Act. They provide banking services to urban and semi-urban areas, especially to low-income groups, small businesses, and self-employed people.
• Regulated by: RBI, Registrar of Cooperative Societies in each state (for overseeing UCBs).
• Governed by the Banking Regulations Act, 1949. They are based on the principles of Cooperation, mutual help, democratic decision-making, and open membership.

Statement 2 is correct

• UCBs can raise capital through three broad methods, viz:- issuance of equity shares, preference shares, and debt instruments.

Statement 3 is correct

• In 1966, an amendment to the Banking Regulation Act, 1949 brought Urban Cooperative Banks (UCBs) under the RBI’s supervision for banking functions, while their management and administrative matters continued to be governed by state cooperative laws.

Answer: (b) 2 and 3 only; Difficulty Level: Hard