Revised Regulatory Framework for Urban Co-operative Banks (UCBs) |

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Recently Reserve bank of India has revised the Regulatory Framework for Urban Co-operative Banks (UCBs). This circular is applicable to all Primary (Urban) Co-operative Banks. The instructions come into effect from April 1, 2023.

How UCB are categorized?

The UCBs have been categorized into following four tiers for regulatory purposes:
a) Tier 1 – All unit UCBs and salary earners’ UCBs (irrespective of deposit size), and all other UCBs having deposits up to ₹100 crore
b) Tier 2 – UCBs with deposits more than ₹100 crore and up to ₹1000 crore
c) Tier 3 – UCBs with deposits more than ₹1000 crore and up to ₹10,000 crore
d) Tier 4 – UCBs with deposits more than ₹10,000 crore

What is the criteria of Minimum net worth?

UCBs shall have minimum net worth as under:

Tier 1 UCBs operating in a single district shall have minimum net worth of ₹2 crore.
All other UCBs (of all tiers) shall have minimum net worth of ₹5 crore.
UCBs which currently do not meet the minimum net worth requirement, as above, shall achieve the minimum net worth of ₹2 crore or ₹5 crore (as applicable) in a phased manner. Such UCBs shall achieve at least 50 per cent of the applicable minimum net worth on or before March 31, 2026 and the entire stipulated minimum net worth on or before March 31, 2028.

What is the minimum capital to risk weighted assets ratio (CRAR) requirement?

UCBs shall maintain minimum CRAR as under:

Tier 1 UCBs shall maintain, as hitherto, a minimum CRAR of 9 per cent of Risk Weighted Assets (RWAs) on an ongoing basis.
Tier 2 to 4 UCBs shall maintain a minimum CRAR of 12 per cent of RWAs on an ongoing basis.
UCBs in Tier 2 to 4, which do not currently meet the revised CRAR of 12 per cent of RWAs, shall achieve the same in a phased manner. Such UCBs shall achieve the CRAR of at least 10 per cent by March 31, 2024, 11 per cent by March 31, 2025, and 12 per cent by March 31, 2026.

What is a Urban Cooperative Bank?

Co-operative Banks were born out of the concept of co-operative credit societies where members from a community group together to extend loans to each other, at favorable terms.
Co-operative Banks are of two types Urban and Rural co-operative banks based on their region of operation.

The UCBs were under dual regulation by the state registrar of societies and the RBI. They are registered under the Cooperative Societies Act of the State concerned or the Multi-State Cooperative Societies Act, 2002.

The Reserve Bank regulates and supervises the banking functions of UCBs under the
provisions of Banking regulation Act, 1949(AACS). Within the Reserve Bank, a separate department, viz. Urban Banks Department, has been entrusted with these functions

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