Urban co-operative banks are now allowed to open a demat account for customers to provide online trading facility, according to the Reserve Bank of India.
“However, considering the high risk involved in such services, it has been decided to allow only Scheduled Primary (Urban) Co-operative Banks, with prior approval of the Reserve Bank, to provide online trading facility to their demat account holders by entering into a tie-up with a broking entity,” the RBI said in a notification.
Also, to obtain the facility, assessed networth of such UCBs should not be less than Rs 500 crore and be financially sound and well managed.
Other conditions set by the central bank for the UCBs to apply to the RBI are that the UCBs must also be registered with SEBI as Depository Participants, have implemented Core Banking Solutions (CBS) fully and should be offering internet banking services to their customers.
UCBs which fulfil the above mentioned conditions can submit their applications to the RBI with a copy of Board Resolution to the effect that they would not be offering tips/ recommendations to their customers for on-line trading and would also not be undertaking portfolio management services, RBI stated.
The decision to allow the UCBs was taken after the RBI received requests from Indian Banks’ Association and Cooperative Federations.