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RBI moots special shares for UCBs as new source to raise capital
These special shares are to be issued at book value and would carry the same face value as member shares. However, SSCs shall be issued without voting rights and will not confer any form of membership rights on investors, according to the RBI's discussion paper on capital-raising avenues for UCBs.
The RBI noted that a system of dual-class shares in co-operative institutions is well established internationally. It also pointed out that amendments to the Banking Regulation Act made in 2020 contain enabling provisions for the issuance of such special shares.
The premium—defined as the difference between the face value and the book value—received on SSCs may be transferred to a 'Special Shares Premium Account'. This account may be disclosed under 'Reserve Fund and Other Reserves', the RBI added.
The outstanding amount of SSCs (excluding premium), along with the outstanding amount of Perpetual Non-Cumulative Preference Shares (PNCPS) and Perpetual Debt Instruments (PDIs), should not exceed 35 per cent of the total Tier I capital at any point in time.
The board of directors of the UCB will be empowered to determine the amount of SSCs to be raised by the bank. UCBs will be required to submit the offer document to the RBI—including all necessary details and disclosures regarding SSCs—at least one month prior to the issuance date.
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