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?
Answer & explanation
Answer: (b) 2 and 3 only
Urban cooperative banks (UCBs) are under dual control: the RBI regulates and supervises their banking functions, while the Registrar of Cooperative Societies handles registration and management. There are no 'local boards' of the State for this. They came under the Banking Regulation Act from 1 March 1966 and can raise capital through shares, including preference shares.
- ✗ 1. The RBI (through its Urban Banks Department) regulates and supervises UCBs' banking functions under the Banking Regulation Act, 1949 (AACS); the State's role is through the Registrar of Cooperative Societies, not local boards.
- ✓ 2. UCBs raise share capital by issuing shares to members, and the RBI also permits them to issue preference shares and certain debt instruments to strengthen their capital.
- ✓ 3. Cooperative banks were brought under the Banking Regulation Act, 1949 with effect from 1 March 1966, which began the dual control of RBI and the Registrar.
Remember · UCBs: dual control since 1 March 1966 — RBI for banking functions (BR Act, 1949 AACS), Registrar of Cooperative Societies for registration, management and audit.
Sources
- RBI, Urban Banks Department (About Us) ↗ “The Reserve Bank regulates and supervises the banking functions of UCBs under the provisions of Banking regulation Act, 1949(AACS).”
- RBI, Brief History of Urban Cooperative Banks in India ↗ “Large cooperative banks with paid-up share capital and reserves of Rs.1 lakh were brought under the perview of the Banking Regulation Act 1949 with effect from 1st March, 1966”
- RBI circular: Issue and regulation of share capital and securities - Primary (Urban) Co-operative Banks (8 March 2022) ↗ “UCBs are also permitted to issue the following instruments to augment their capital: I. Preference Shares Perpetual Non-Cumulative Preference Shares (PNCPS) eligible for inclusion in Tier I capital”
Question and answer: UPSC's official GS Paper I (2021, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·