RBI Discussion Paper Proposes To List Securities Of Urban Co-Operative Banks

Based on the recommendations of the working group, the Reserve Bank of India has released a discussion paper, proposing capital raising avenues for urban co-operative banks.

According to the discussion paper, the RBI has proposed listing of securities of urban cooperative banks. The securities include shares, debentures and bonds issued by them.

At present, financial instruments issued by urban co-operative banks in general cannot be listed on a stock exchange.

The listing of securities will bring urban cooperative banks under the regulation of the Securities Exchange Board of India and will improve robust disclosures and investor protection. Stock exchanges will provide technologically advanced trading platforms which will improve liquidity and price discovery of these securities.

A centralised trading platform will give access to securities of all urban co-operative banks, unlike trading on websites, which can facilitate wider investor participation.

"Stock exchanges bring uniformity in disclosure, trading rules and settlement processes, thereby avoiding inconsistency and operational complexity that would arise with each UCB managing its own trading system," the paper said.

However, the enabling listing would require detailed consultations and legislative changes to various acts. The listing of these securities will increase regulatory burden on smaller urban cooperative banks, the paper said.

This has come as the RBI in October 2024 had proposed to issue a discussion paper on the same based on the recommendations of the working group. 

The report of the expert committee on primary urban co-operative banks is chaired by NS Vishwanathan, former deputy governor of the RBI.

Thereafter, a working group was constituted in the RBI to operationalise the recommendations of the expert committee on these newly enabled capital-related provisions.