The imposition of All-inclusive Directions (AID) on an Urban Co-operative Bank (UCB), inter alia, restricts the bank from discharging its liabilities except as permitted by RBI. This impacts the withdrawal of interbank deposits placed by other UCBs with such banks as also the timely discharge of interbank exposures such as discounted bills drawn under Letter of Credit (LC) issued by the UCB under AID.
The RBI said that, the interbank exposure arising from deposits placed by UCBs with a UCB under AID and their non-performing exposures arising from discounted bills drawn under LCs issued by a UCB under AID shall be fully provided within five years at the rate of 20% annually. Further, the interest receivable on the deposits shall not be recognized as income by the UCBs.
The RBI also said that, If the UCBs choose to convert such deposits into long term perpetual debt instruments (e.g. Innovative Perpetual Debt Instrument – IPDI) which may be recognized as a capital instrument under a scheme of restructuring/ revival of a UCB under AID, the provision on the portion of deposits converted into such instruments shall not be required.Subscribe Taxscan AdFree to view the Judgment