IIBF UCB Certificate cheat sheet

Legal basis: co-operative societies are governed by the Multi-State Co-operative Societies Act, 2002 at the federal level and by respective State Co-operative Societies Acts; banking regulation sits with the Reserve Bank under the Banking Regulation Act, 1949 as applied to co-operative societies.

Three-tier structure: primary (urban) co-operative banks at the base, state/district central co-operative banks in the middle, and state co-operative banks at the apex; urban banks serve predominantly urban and semi-urban clientele.

Licensing: a new urban co-operative bank needs registration under the relevant Co-operative Societies Act plus an RBI banking licence under Section 22 of the Banking Regulation Act, 1949; minimum net worth norms must be met on entry and maintained thereafter.

Classification by scheduled status and tier: scheduled urban co-operative banks must satisfy paid-up capital and deposit benchmarks and comply with CRR/SLR on the same footing as commercial banks; non-scheduled banks follow relaxed but defined reserve norms.

Management: the board is elected by the general body of members on a one-member-one-vote principle, unlike a company where voting is proportional to shareholding; the RBI can supersede the board and appoint an administrator for up to defined periods.

Key prudential ratios: CRAR (capital to risk-weighted assets), gross and net NPA ratios, and the credit-deposit ratio are the standard measures; urban banks are expected to keep CRAR above the regulatory minimum prescribed for their tier.

NPA classification is time-based: an asset becomes substandard after being overdue beyond 90 days, doubtful after remaining substandard for 12 months, and loss assets are those identified as uncollectible by the bank or auditors.

Deposit insurance covers each depositor per bank up to the limit set by the DICGC; the cover applies to principal plus interest, and co-operative banks are insured entities subject to premium payment.

Priority sector lending obligations apply to urban co-operative banks, with targets for weaker sections, micro enterprises, and housing loans calibrated to bank size and category.

Know Your Customer: identity and address verification is mandatory at account opening; periodic re-KYC is risk-based, with high-risk customers reviewed more frequently than low-risk ones.

Cash transactions above the prescribed threshold, and suspicious transactions regardless of amount, must be reported to FIU-IND; the bank cannot tip off the customer about a report.

Aadhaar-based e-KYC and video-based customer identification are permitted alternatives to physical documentation, subject to consent and audit trail requirements.

Loan appraisal: for term loans above the prescribed limit, a techno-economic viability study and credit rating are required; working capital limits are assessed using the turnover or drawing power method.

Security: a charge on immovable property must be registered with the CERSAI and the registrar of companies or co-operative department, as applicable, to be enforceable against third parties.

Recovery: SARFAESI enforcement is available to co-operative banks subject to the statutory notification; the 60-day demand notice precedes possession or sale of secured assets.

Interest and penalty: penal interest cannot be charged on agricultural loans in line with the applicable waiver instructions; penal charges on other loans must be disclosed in the loan agreement.

Audit: statutory audit is by a chartered accountant or a panel auditor appointed under the co-operative law, while RBI conducts inspection of the bank's financial position under Section 35 of the Banking Regulation Act, 1949.