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Mahesh

03/12/22 07:27 AM IST

RBI announces 4-tiered regulatory framework for urban cooperative banks

In News 
  • The Reserve Bank of India (RBI) recently announced a four-tiered regulatory framework for categorisation of Urban Co-operative Banks (UCBs).
About the Framework 
  • The four-tiered regulatory framework, based on size of deposits of the UCBs, will come into force with immediate effect.
  • The extant regulatory framework classifies UCBs into two tiers -- Tier I and Tier II.
  • The RBI has categorised all unit UCBs and salary earners' UCBs (irrespective of deposit size), and all other UCBs having deposits up to Rs 100 crore in Tier 1.
  • In Tier 2, it has placed UCBs with deposits more than Rs 100 crore and up to Rs 1,000 crore. Tier 3 will cover banks with deposits more than Rs 1,000 crore and up to Rs 10,000 crore.
  • UCBs with deposits more than Rs 10,000 crore have been categorised in Tier 4.
  • RBI has listed out the net worth and capital adequacy requirements of the UCBs.
  • Tier 1 UCBs operating in a single district should have minimum net worth of Rs 2 crore. For all other UCBs (in Tier 1, 2 and 3) tiers), the minimum net worth should be Rs 5 crore.
  • UCBs which currently do not meet the revised minimum net worth requirement will have to achieve the minimum net worth of Rs 2 crore or Rs 5 crore (as applicable) in a phased manner.
  • The central bank has also prescribed minimum capital to risk weighted assets ratio requirement for UCBs.
  • Tier 1 UCBs have to maintain, as hitherto, a minimum capital to risk weighted assets ratio of 9 per cent of Risk Weighted Assets (RWAs) on an ongoing basis.
  • Tier 2 to 4 UCBs have to maintain a minimum capital to risk weighted assets of 12 per cent of RWAs on an ongoing basis.
Source- Business standard 

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