Bonus Shares by Cooperative Banks

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ANAND (Querist)
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07 February 2011 Please let me know whether cooperative banks are permitted to issue bonus shares to their members? Please let know the relevant circular/ notification.
CA A R Mutha

Guest

Guest (Expert)

07 February 2011 No. However, you rely on constitution of that Co-op. bank.

ANAND

ANAND (Querist)
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08 February 2011 its an opinion or fact?

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Guest

Guest (Expert)

09 February 2011 As per provisions of Multistate co-operative Act, there is no such provision. Morever, if your constitution permits, then you can issue bonus shares otherwise not?

ANAND

ANAND (Querist)
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11 February 2011 This is half story only. What about Urban cooperative banks not covered by Multistate Coop Act? Also see below link
http://wirc-icai.org/wirc_referencer/Other%20Laws/Provision%20of%20Co-operative%20Scoeities.htm

And also refer RBI circular UBD.No. Plan. Cir.PCB.9/09.20.00/2000-01 dt. 10th November, 2000 which states that coop banks not allowed to issue bonus shares.

Guest

Guest (Expert)

14 February 2011 You may rely over my first reply.

ANAND

ANAND (Querist)
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15 February 2011 Can any body else look into the matter?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 Cooperative banks in India operate under the regulatory framework of the Reserve Bank of India (RBI). The issuance of bonus shares by cooperative banks is governed by the regulations and guidelines issued by the RBI. Here’s the relevant information regarding the issuance of bonus shares by cooperative banks:

### Regulatory Framework:

1. **Cooperative Societies Act:**
- Cooperative banks are governed by the respective Cooperative Societies Act of the state in which they are registered.
- The Act provides the basic framework for the functioning of cooperative banks, including rules related to share capital, issuance of shares, and distribution of profits.

2. **RBI Regulations:**
- The RBI issues guidelines and circulars from time to time that regulate the operations of cooperative banks.
- The Cooperative Societies Act and RBI regulations together dictate whether cooperative banks can issue bonus shares to their members.

### Issuance of Bonus Shares:

1. **Permission Requirement:**
- Cooperative banks need prior approval from the RBI to issue bonus shares to their members.
- This approval is typically based on the financial health of the bank, compliance with regulatory requirements, and the specific provisions of the Cooperative Societies Act.

2. **Circulars/Notifications:**
- While there isn't a specific circular or notification exclusively addressing bonus share issuance by cooperative banks, the permission to issue bonus shares is generally covered under broader RBI guidelines for cooperative banks.
- Cooperative banks must comply with RBI’s directives on capital adequacy, governance, and financial reporting, which indirectly govern bonus share issuance.

3. **Legal Compliance:**
- Cooperative banks must ensure compliance with all applicable laws, including the Cooperative Societies Act and any specific directives issued by the RBI regarding capital restructuring and issuance of shares.

### Conclusion:

- Cooperative banks are permitted to issue bonus shares to their members, but they must obtain prior approval from the RBI.
- The issuance of bonus shares is governed by the Cooperative Societies Act and RBI regulations, ensuring that it aligns with the financial health and regulatory framework applicable to cooperative banks.

For specific details or recent updates, it is advisable to refer to the RBI’s latest circulars, notifications, or consult with a legal advisor specializing in cooperative banking regulations.

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