RBI announces four tier regulatory framework for urban cooperative banks

Besides this, the RBI has laid down norms related to the net worth and capital adequacy of these banks, reported news agency PTI.

Based on the size of deposits of UCBs, a four-tier regulatory framework will come into force with immediate effect. As per details, the current regulatory framework classifies UCBs into two tiers – Tier I and Tier II.

In view of the diversity in the co-operative sector, RBI said in its circular, there is a need for a level playing field regulatory framework, adding such a framework needs to balance the spirit of reciprocity and small-sized banks and banks with limited area. is more prevalent. The growth ambitions of large sized urban co-operative banks and the simultaneous handling of more complex business activities.

Read also: RBI imposes monetary penalty on 2 co-operative banks based in Mumbai

“…it has been decided to move to a four-tier regulatory framework for classification of UCBs as against the existing two-tier framework.”

With the objective of strengthening the financial soundness of UCBs, the classification may be used for differentiated regulatory prescription.

RBI has classified all unit UCBs and salaried UCBs (irrespective of deposit size) and all other UCBs as having deposits. 100 crores in Tier 1.

In Tier 2, it placed UCBs with deposits in excess of 100 crores and up 1,000 crores. Tier 3 will cover banks with deposits above 1,000 crores and up 10,000 crores. UCBs with deposits above Rs. 10,000 crore is classified in Tier 4, the circular said.

“If a UCB moves to a higher level due to increase in deposits in any year, it may be provided a glide path of up to a maximum of three years to comply with higher regulatory requirements,” RBI said.

RBI, in another circular, listed the net worth and capital adequacy requirements of UCBs. Tier 1 Urban Cooperative Banks operating in any one district should have a minimum net worth of 2 crores. For all other UCBs (Tier 1, 2 and 3) levels, the minimum net worth should be 50 million.

UCBs, which currently do not meet the revised minimum net worth requirement, will have to achieve a minimum net worth 2 crores or 5 crore (as applicable) in a phased manner, RBI said. The central bank has also prescribed minimum capital to risk weighted assets ratio requirement for UCBs.

Tier 1 UCBs are required to maintain a minimum capital to risk weighted assets ratio of 9 per cent of risk weighted assets (RWA) on an ongoing basis. The circular states that Tier 2 to 4 UCBs will have to maintain a minimum capital of 12 per cent of RWA in risk weighted assets.

With PTI inputs.