March 21, 2006
All State and District Central Co-operative
Banks (StCBs/DCCBs)
Dear Sir,
Investment Portfolio of State and District Central
Co-operative Banks (StCBs/DCCBs)- Irregularities observed by NABARD
NABARD has forwarded a list of irregularities
observed in the half-yearly review of investment portfolios of StCBs/DCCBs.
In this connection, your attention is invited to our guidelines listed in Annex,
relating to investment portfolio of banks. The major deficiencies observed by
NABARD and the steps to be taken in the matter are as under:
1) Many banks have not undertaken the half-yearly
review of their investment portfolio.
You may diligently undertake half-yearly review
of the investment portfolio. If any bank does not invest in government securities,
PSU bonds etc, it should submit a 'NIL' report in this regard to the Regional
Office of NABARD and RBI concerned within one month from the end of the respective
half-year.
2) Some banks have not framed their investment
policy.
As per extant instructions, all StCBs/DCCBs
have been instructed to frame their investment policy. If any bank is not undertaking
investment in government securities, PSU bonds, etc, it should adopt a resolution
in this regard and forward the same to Regional Office of NABARD and RBI concerned.
3) Some banks do not have approved panel of
brokers.
Many StCBs/DCCBs have written that as they do
not involve brokers in any transaction, no panel for the purpose has been approved.
All StCBs are advised to prepare an approved panel of brokers, which can be
used by all the DCCBs also as and when they undertake any transaction through
any broker. No StCB/DCCB should undertake any transaction involving a broker
who is not in the approved panel.
4)StCBs/DCCBs have placed funds as deposits
with PSU/Companies / Corporations/ UCBs/NBFCs etc.
As you are aware, placing of funds as deposits
with PSUs/ Companies/ Corporations/UCBs/NBFCs, etc is not allowed as per extant
instructions. If any bank is violating the same, it should frame a realistic
time-bound programme to retire such excess investments with the approval of
Regional Offices of RBI and NABARD and submit a quarterly progress report for
the same.
5) Some StCBs/DCCBs are not submitting the quarterly
certificate of securities actually held by them to the Regional Office of RBI.
All StCBs/DCCBs have been advised to submit
certificate of holding of securities to the Regional Office of RBI each quarter.
It should be ensured that the certificate is submitted within one month from
the end of each quarter.
6) Irregularities in non-SLR investments
As per extant instructions, StCBs/DCCBs are
allowed to place their genuine surplus funds in non-SLR investments as under:
a) bonds of public sector undertakings
b) bonds / equity of All-India Financial Institutions
(AFIs)
The total investment in (a) and (b) above should
not exceed 10 per cent of the bank’s total deposits as on March 31 of the previous
year, with a sub-ceiling of 5 per cent for investments covered under (a).
Investment in mutual funds, non-PSU bonds, etc,
is not allowed. If any bank has made such investments, it should frame a realistic
time-bound programme to retire the same with the approval of Regional Offices
of RBI and NABARD concerned and submit quarterly progress report of the same.
7) Concurrent audit of SLR investment portfolio
is not undertaken and the monthly audit of treasury transaction is not forwarded
to NABARD/RBI.
All StCBs/DCCBs are advised to comply with the
above requirement without fail.
8) Violation of Section 19 of the B.R.Act, 1949
(AACS), - investments in shares of other co-operative institutions in violation
of the prescribed limits.
All StCBs/DCCBs are advised to follow the extant
instructions in the matter.
Yours faithfully,
(Molina Chowdhury)
Deputy General Manager
ANNEX
|
S.No
|
Circular number
|
Circular date
|
Subject
|
|
1
|
RPCD.CO.RF.BC 40/07.02.03/2005-06
|
September 21, 2005
|
Investment portfolio of banks- non-SLR investments
|
|
2
|
RPCD.CO.RF.BC. 26/07.02.03/2005-06
|
August 4, 2005
|
Investment portfolio of banks- non-SLR investments
|
|
3
|
RPCD.CO.RF.BC. 14/07.02.03/2005-06
|
July 13, 2005
|
Investment portfolio of State and District Central Co-operative
Banks (StCBs /DCCBs) - Classification and valuation of investment
|
|
4
|
RPCD.CO.RF.BC. 15/07.02.03/2005-06
|
July 13, 2005
|
Government Securities Transactions – T+1 Settlement
|
|
5
|
RPCD.CO.RF.BC. 16/07.02.03/2005-06
|
July 13, 2005
|
Sale of Securities allotted in Primary issues
|
|
6
|
RPCD.CO.RF.BC No. 19/07.02.03/2004-05
|
August 17, 2004
|
Investment of surplus funds by State/District Central
Co-operative Banks- All India Financial Institutions.
|
|
7
|
RPCD.CO.RF.BC 65/07.02.03/2003-04
|
February 23, 2004
|
Prudential guidelines on investment in non-SLR debt securities.
|
|
8
|
RPCD.RF.BC.No 62/07.02.03/2002-03
|
January 20,2003
|
Investment in non-SLR securities by State/District Central
Co-operative Banks
|
|
9
|
RPCD.No.RF.BC 22/07.02.03/2002-03
|
September 27, 2002
|
Certification of holding of securities in bank’s investment
portfolio
|
|
10
|
RPCD.CO.RF.BC 19/07.02.03/2002-03
|
September 16, 2002
|
Investment portfolio of banks – Transactions in securities.
|
|
11
|
RPCD.RF.BC.No 107/07.02.03/2001-02
|
June 18, 2002
|
Certification of Holding of Securities.
|
|
12
|
RPCD.CO.RF.BC.No 98/07.37.02/2001-02
|
May 30, 2002
|
Investments in government securities.
|
|
13
|
RPCD.CO.RF.BC 92/07.02.03/2001-02
|
May 18, 2002
|
Investment of surplus funds as deposits with urban co-operative
banks.
|
|
14
|
RPCD.CO.RF.BC 93/07.37.02/2001-02
|
May 06, 2002
|
Investment Portfolio of Banks – Transactions in Securities.
|
|
15
|
ACD.BR. 388/A.11(19)/65-66
|
March 1, 1966
|
Section 19 of the B.R.Act, 1949 (AACS)- Restriction on
holding shares in other co-operative societies.
|