NEW DELHI: The Reserve Bank of India (RBI) may come out with draft guidelines for trading of cooperative bank shares by year-end or early 2026, according to sources familiar with the development. Final guidelines could come by next financial year.
Several cooperative banks and National Urban Co-operative Finance and Development Corporation (NUCFDC), the umbrella organisation for urban cooperative banks, have already submitted their response to the proposals.
Sources said that urban cooperative banks have positively responded to the proposal. “Banks see this as a way to strengthen their capital base, which in turn supports asset growth and helps absorb NPAs — just like in commercial banks,” said one of the sources quoted earlier.
Co-operative banks primarily raise funds through member contributions (ownership shares at face value) and deposits. Some also raise limited debt from NBFCs or other banks, but they are not a major source of funding yet, he said.
RBI has proposed introducing a special category of shares that can be sold and redeemed at market value. They are also exploring whether the SRO or umbrella organisation could run a trading platform for such shares, since cooperatives are not governed by the Companies Act or SEBI.
Currently, UCBs have only one category of shares — ownership shares — which are issued and redeemed at face value. So even if a bank’s valuation rises 100x, the shareholder gains nothing. The source mentioned earlier said that a bank recently got its valuation done, and each of its shares was valued at Rs 1,900, but in absence of a mechanism to trade them in a secondary market, the share is worth just Rs 10 (its face value).
There are around 1,500 urban cooperative banks with Rs 5.5 lakh crore in deposits and Rs 3.36 lakh crore in advances. National Urban Co-operative Finance and Development Corporation (NUCFDC) will soon qualify as the first Self-Regulatory Organisation for UCBs.
