Q.Explain the division of control between the Reserve Bank of India and the Registrar of Co-operative Societies over an urban co-operative bank.

Because a UCB is both a bank and a co-operative, each regulator looks after one side of it.

An urban co-operative bank is regulated by two authorities at once — the phenomenon of dual control — because it is at the same time a bank and a co-operative society. The division of control is as follows:

Reserve Bank of India (the banking side) — under the Banking Regulation Act, 1949 (as applicable to co-operative societies) and the RBI Act, 1934:

• Grants (and may cancel) the banking licence without which no society may do banking.
• Fixes the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
• Lays down rules on loans, advances and interest, and prudential norms on capital and bad debts.
• Inspects and supervises the bank's banking operations; deposits are insured up to the prescribed limit by the DICGC.

Registrar of Co-operative Societies (the co-operative side) — under the Maharashtra Co-operative Societies Act, 1960 (or the Multi-State Co-operative Societies Act, 2002):

• Registers the bank and approves and amends its bye-laws.
• Oversees membership, the election and conduct of the managing committee, and general body meetings.
• Calls for and audits its accounts, and deals with disputes, amalgamation, division and winding-up. …

The commonest mistake is to assign the banking licence or CRR/SLR to the Registrar. All banking matters — licence, reserves, inspection, lending norms — belong …