RRBs & Co-operative — Set 4

Correct Answer: D. It is managed by a Board of Directors representing the three shareholders

• **It is managed by a Board of Directors representing the three shareholders** = The Board includes nominees from the Central Government (50% share), State Government (15% share), and the Sponsor Bank (35% share), ensuring balanced governance. • **Equity split fixed by RRB Act 1976** — Central Govt : Sponsor Bank : State Govt = 50 : 35 : 15; the Chairperson is typically a nominee of the Sponsor Bank. • 💡 Option A (Sponsor Bank only) is wrong because no single shareholder controls management alone; Option B (RBI directly) is wrong because RBI is the regulator, not the management authority; Option C (Village Panchayat) is wrong because Panchayats have no role in RRB governance.

Correct Answer: C. Total Deposits

• **Total Deposits** = The RBI classifies Urban Co-operative Banks (UCBs) into four tiers strictly based on the size of their total deposits, not branches or profit. • **Tier thresholds (RBI 2022 framework)** — Tier 1: deposits up to Rs 100 cr; Tier 2: Rs 100 cr to Rs 1,000 cr; Tier 3: Rs 1,000 cr to Rs 10,000 cr; Tier 4: deposits above Rs 10,000 cr. • Higher tiers face stricter capital adequacy and governance norms, including mandatory listing requirements for Tier 4. • 💡 Option A (Number of members) is wrong because membership size is not the RBI classification criterion; Option B (Profit margin) is wrong because profitability is unrelated to tier assignment; Option D (Number of branches) is wrong because branch count is also not a tiering criterion.

Correct Answer: B. 1964

• **1964** = NAFSCOB (National Federation of State Co-operative Banks) was established in May 1964 to serve as the apex body of State Co-operative Banks across India. • **Headquarters in Mumbai** — NAFSCOB coordinates policy advocacy for the short-term co-operative credit structure and liaises with NABARD and RBI on behalf of StCBs. • 💡 Option A (1955) is wrong because 1955 predates NAFSCOB's founding; Option C (1972) is wrong because NAFSCOB already existed by then; Option D (1982) is wrong because that is the year NABARD was established, not NAFSCOB.

Correct Answer: D. State Government laws

• **State Government laws** = Under Entry 32 of the State List in the Indian Constitution, co-operative societies are a state subject, so PACS are formed and governed by each state's own Co-operative Societies Act. • **97th Constitutional Amendment (2011)** — Added Article 43B and Part IXB to promote autonomous and democratic functioning of co-operatives, but implementation remains with states. • 💡 Option A (International co-operative norms) is wrong because India's PACS follow domestic state law, not ICA norms directly; Option B (RBI guidelines only) is wrong because PACS are outside the Banking Regulation Act; Option C (Union Government laws) is wrong because co-operation is not a Central or Concurrent subject.

Correct Answer: D. A bank included in the 2nd schedule of RBI Act

• **A bank included in the 2nd Schedule of RBI Act** = A Scheduled Co-operative Bank must satisfy RBI criteria on paid-up capital (at least Rs 5 lakh) and reserves; inclusion in the 2nd Schedule grants access to RBI's borrowing window. • **Large UCBs qualify** — Multi-state UCBs and large single-state UCBs with sufficient capital are commonly granted Scheduled status, improving their credibility and market access. • 💡 Option A (No capital) is wrong because minimum capital is a prerequisite for scheduled status; Option B (Only one branch) is wrong because branch count is irrelevant to scheduling; Option C (Village registration) is wrong because geographic location has no bearing on Schedule 2 inclusion.

Correct Answer: A. 2020

• **2020** = The Banking Regulation (Amendment) Act, 2020 gave the RBI full powers over co-operative banks' governance, audit, and management, almost on par with commercial banks. • **Key trigger: PMC Bank crisis (2019)** — The Punjab and Maharashtra Co-operative Bank scam exposed regulatory gaps, directly prompting the 2020 amendment that ended decades of limited RBI oversight. • 💡 Option B (1949) is wrong because the original Banking Regulation Act had very limited application to co-operatives; Option C (2015) is wrong because no major co-operative banking law was passed then; Option D (1966) is wrong because 1966 only extended certain banking provisions to co-ops, not full regulatory powers.

Correct Answer: A. Gramin Banks

• **Gramin Banks** = RRBs are universally known as Gramin Banks (rural banks) because they were designed exclusively for village-level banking and their official names almost always include the word Gramin. • **First five RRBs (October 2, 1975)** — The inaugural batch included Prathama Bank (UP), Gaur Gramin Bank (Bihar), Gorakhpur Kshetriya Gramin Bank, Haryana Kshetriya Gramin Bank, and Jaipur-Nagaur Aanchalik Gramin Bank. • 💡 Option B (Agricultural Banks) is wrong because that is a generic description, not the popular name; Option C (Rural Finance Corporations) is wrong because that term applies to state-level institutions, not RRBs; Option D (Tehsil Banks) is wrong because RRBs operate at district level, not tehsil level.

Correct Answer: B. Recovery of bad loans

• **Recovery of bad loans** = The SARFAESI Act (2002) allows banks to auction mortgaged assets to recover dues without court intervention; its extension to co-operative banks empowers them to deal with rising NPAs efficiently. • **Supreme Court verdict, 2020** — In Pandurang Ganpati Chougule vs Vishwasrao Patil Murgud Sahakari Bank, the SC upheld that SARFAESI applies to co-operative banks since they are banks under Section 2(1)(c). • 💡 Option A (Foreign exchange trading) is wrong because SARFAESI has nothing to do with forex; Option C (Recruiting new staff) is wrong because SARFAESI is purely an asset-recovery law; Option D (Opening new branches) is wrong because branch expansion is governed by RBI licensing norms, not SARFAESI.

Correct Answer: A. More than one

• **More than one** = A Multi-State Co-operative Society (including a Multi-State Co-operative Bank) operates in more than one state and is registered under the Multi-State Co-operative Societies Act, 2002, with no fixed upper cap on the number of states. • **Registered with Central Registrar** — Unlike single-state co-ops (registered with the State Registrar), multi-state societies come under the Central Registrar of Co-operative Societies, Ministry of Cooperation. • 💡 Option B (Unlimited) is technically true in practice but More than one is the precise legal definition given in the Act; Option C (Five) is wrong because no five-state cap exists in law; Option D (Two) is wrong because the minimum is two states but there is no maximum.

Correct Answer: A. Deposits from rural households and refinance from NABARD

• **Deposits from rural households and refinance from NABARD** = RRBs primarily mobilize low-cost savings (savings accounts, recurring deposits, FDs) from rural communities and supplement them with low-interest refinance from NABARD and their Sponsor Banks. • **NABARD's refinance role** — NABARD provides short-term, medium-term, and long-term refinance to RRBs under Sections 21 and 22 of the NABARD Act, 1981, at concessional rates to on-lend to priority sectors. • 💡 Option B (Government subsidies) is wrong because subsidies are not a primary funding source for RRBs; Option C (Equity from public) is wrong because RRBs cannot issue shares to the general public; Option D (Foreign loans) is wrong because RRBs have no mandate or mechanism to borrow from abroad.