July 19, 2022
The Reserve Bank of India had constituted the Expert Committee on Urban Co-operative Banks (the Committee) on February 15, 2021 under the Chairmanship of Shri N. S. Vishwanathan, former Deputy Governor, Reserve Bank to examine the issues in urban cooperative banking sector, provide a medium term road map, suggest measures for faster resolution of UCBs and recommend suitable regulatory/ supervisory changes for strengthening the sector by leveraging the recent amendments to Banking Regulation Act, 1949 (As Applicable to Cooperative Societies). The report submitted by the Expert Committee was placed on the RBI’s website on August 23, 2021 inviting comments of stakeholders and
members of public. The recommendations of the Committee have since been examined for implementation duly factoring the feedback received.
2. The Committee, inter alia, recommended a four-tiered regulatory framework based on size of deposits of the banks and their area of operations. The differentiated regulatory approach was mainly recommended for key parameters such as net worth, Capital to Risk-weighted Assets Ratio (CRAR), branch expansion and exposure limits. Membership in an Umbrella Organization (UO) also formed a vital part of the recommendations.
3. While examining the recommendations, Committee’s vision of turning UCBs into friendly neighborhood banks and the heterogeneity of the sector have been duly kept in view. In order to make the sector more robust and support its orderly growth, the capital requirements have been suitably recalibrated. Further, a suitable glide path has also been provided for a nondisruptive transformation of the sector. The measures for strengthening the sector are also being supplemented by offering more operational flexibility to strong UCBs to serve their desired role in credit intermediation.
- The major recommendations which have been accepted are as follows :
- It has been decided to adopt a simple four-tiered regulatory framework with differentiated regulatory prescriptions aimed at strengthening the financial soundness of the existing UCBs1. Specifically, a minimum net worth of ₹2 crore for Tier 1 UCBs operating in single district and ₹5 crore for all other UCBs (of all tiers) has been stipulated. This is expected to strengthen the financial resilience of the banks and enhance their ability to fund their growth. As per the data reported by UCBs as on March 31, 2021, most of the banks already comply with the requirement. The UCBs which do not meet the requirement, will be provided a glide path of five years with intermediate milestones to facilitate smooth transition to revised norms.
- It has been decided to adopt a simple four-tiered regulatory framework with differentiated regulatory prescriptions aimed at strengthening the financial soundness of the existing UCBs1. Specifically, a minimum net worth of ₹2 crore for Tier 1 UCBs operating in single district and ₹5 crore for all other UCBs (of all tiers) has been stipulated. This is expected to strengthen the financial resilience of the banks and enhance their ability to fund their growth. As per the data reported by UCBs as on March 31, 2021, most of the banks already comply with the requirement. The UCBs which do not meet the requirement, will be provided a glide path of five years with intermediate milestones to facilitate smooth transition to revised norms.
To Read More….
Click the link below….
Press Release : https://www.dropbox.com/s/7j94q7l1nuagjyb/Revised%20Regulatory%20Framework%20for%20Urban%20Co-operative%20Banks%20%28UCBs%29.PDF?dl=0