The Reserve Bank of India (RBI) has revised the regulatory framework for urban cooperative banks (UCBs).
Key provisions
- The revised framework has prescribed a minimum net worth of Rs 2 crore for Tier 1 UCBs and Rs 5 crore for other banks.
- While Tier1 UCBs shall continue to maintain a minimum Capital to Risk Weighted Assets (CRAR) of 9 per cent on an ongoing basis, Tier 2 to Tier 4 UCBs shall maintain a minimum CRAR of 12 per cent on an ongoing basis.
- All unit UCBs and salary earners’ UCBs (irrespective of deposit size), and all other UCBs having deposits up to Rs 100 crore, are classified as Tier 1 UCBs.
- Tier 2 UCBs are UCBs with deposits more than Rs 100 crore and up to Rs 1,000 crore;
- Tier3 UCBs are UCBs with deposits more than Rs 1,000 crore and up to Rs 10,000 crore; and Tier 4 UCBs are banks with deposits more than Rs 10,000 crore.
- UCBs, which currently do not meet the minimum net worth requirement, shall achieve the minimum net worth of Rs 2 crore or Rs5 crore in a phased manner.
Financially sound and well managed (FSWM) UCBs
- The RBI has also revised the criteria for urban cooperative banks (UCBs) for considering them as financially sound and well managed (FSWM).
- One of the criteria is that no monetary penalty should have been imposed on UCBs on account of violation of regulatory directives / guidelines during the last two financial years.
- A UCB that meets criteria related to capital to risk weighted assets (CRAR) of at least 1 percentage point above the minimum CRAR and net nonperforming assets (NPAs) of less than 3 per cent, among others, will be classified as FSWM.
- The other criteria include: net profit for at least three out of preceding four years, subject to it not having incurred a net loss in the immediate preceding year; no default in the maintenance of cash reserve ratio/ statutory liquidity ratio in the preceding fiscal year; and sound internal control system.
