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UCBs - Placement of deposits with other banks for
availing clearing facility
RBI/2009-2010/485
UBD.CO.BSD/PCB. Cir./ 68 /12.22.351/2009-10
June 7, 2010
The Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Placement of deposits with other banks by Primary
(Urban) Co-operative Banks (UCBs) for availing clearing facility
Please refer to our circular No.
UBD. (PCB). BPD. Cir. No. 47/16.20.000/2008-09 dated
January 30, 2009 on the captioned subject. The prudential interbank (gross)
exposure limit and inter-bank counter party limit for placing deposits with
other banks by UCBs for all purposes including for availing clearing facility
was prescribed.
2. Further in terms of para 12.3.5 of Master Circular dated July 1, 2009 UCBs
were advised to formulate a policy taking into account their funds position,
liquidity and other needs for placement of deposits with other banks, the cost
of funds, expected rate of return and interest margin on such deposits, the
counter party risk, etc. and place it before their Board of Directors. It was
further advised that the Board should review the position at least at half
yearly intervals.
3. It has been observed that the smaller non-scheduled UCBs are keeping
current account / minimum required balance for clearing purpose with relatively
larger non-scheduled bank for sub member clearing arrangements. It is possible
that the financial position of the non-scheduled UCB, with whom such deposits
are kept, could take a hit due to unexpected downturn in its business and which
could have a effect on the financial position of the depositing bank and its
business. In view of this non-scheduled UCBs, which have exposures to other
non-scheduled UCBs on account of clearing arrangements, are advised to review
their exposures to such banks periodically based on their published balance
sheet and Profit and Loss account statements.
Yours faithfully,
(P. K. Arora)
General Manager
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