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?
- (a) 1 only
- (b) 2 and 3 only ✓ UPSC's answer
- (c) 1 and 3 only
- (d) 1, 2 and 3
Why the answer is (b)
• Urban Cooperative Banks (UCBs) serve small borrowers in towns and cities under dual control of the RBI (banking functions) and State Registrars (cooperative matters).
• Statement 3 is correct: UCBs were brought under the Banking Regulation Act, 1949 (as applicable to cooperative societies) from 1 March 1966; the 2020 amendment tightened RBI control further.
• Statement 2 is correct: the 2020 amendment allows UCBs to issue equity shares, preference shares and debentures with RBI approval, to raise capital.
• Statement 1 is wrong: UCBs are supervised and regulated by the RBI, not by local boards of State Governments (the Registrar handles only registration and management matters).
• Hence 2 and 3 only, option (b).
Why the other options are wrong
- (a) 1 only
- Statement 1 is wrong: the RBI, not State boards, regulates UCBs.
- (c) 1 and 3 only
- Statement 1 is wrong; statement 2 is correct.
- (d) 1, 2 and 3
- Statement 1 is wrong, so all three cannot be correct.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2021, held on 10 October 2021. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.