There are multiple investment options for Co-operative Banks and Societies. As per RBI Master Circular on Investments by Primary (Urban) Co-operative Bank and the recent amendment to the Indian Trust Act in 2017, Co-operative Societies can invest in many financial instruments. Traditionally, the funds which are in excess of the loans given are invested in fixed deposits of other co-operative banks or nationalized banks. The interest rate received on those excess funds barely matches the interest cost that the bank pays to depositors. After the recent amendment to the Indian Trust Act in 2017, co-operative societies can invest in specified mutual funds. For simplicity, I have divided the deposits with a time horizon of 5+ years and less than 5 years. 1. Deposits with 5+ years time horizon Only deposits with 5+ years' time horizon should be invested in equity. Purely from the perspective of value addition; co-operative societies should invest some part (e.g. 10%) of depo...
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