RBI pronounces four-tiered regulatory framework for Urban Co-operative Banks

The Reserve Bank of India (RBI) on 1 December introduced a four-tiered regulatory framework for categorisation of Urban Co-operative Banks (UCBs).

Apart from this, RBI has come out with norms pertaining to the online value and capital adequacy of those banks, reported information company PTI.

Based on measurement of deposits of the UCBs, the four-tiered regulatory framework will come into power with speedy impact. As per particulars, the extant regulatory framework classifies UCBs into two tiers – Tier I and Tier II.

The RBI, in its round, mentioned given the heterogeneity within the cooperative sector, a tiered regulatory framework is required, including such framework is required to stability the spirit of mutuality and co-operation extra prevalent in banks of smaller sizes and people with restricted space of operation vis-a-vis the expansion ambitions of the large-sized UCBs and undertake extra complicated enterprise actions.

ALSO READ: RBI slaps financial penalty on 2 Mumbai-based cooperative banks

“… it has been decided to adopt a four-tiered regulatory framework, as against the existing two-tiered framework, for categorisation of UCBs,” it mentioned.

Aimed at strengthening the monetary soundness of the UCBs, the categorisation could also be used for differentiated regulatory prescriptions.

The RBI has categorised all unit UCBs and wage earners’ UCBs (regardless of deposit measurement), and all different UCBs having deposits as much as ₹100 crore in Tier 1.

In Tier 2, it has positioned UCBs with deposits greater than ₹100 crore and as much as ₹1,000 crore. Tier 3 will cowl banks with deposits greater than ₹1,000 crore and as much as ₹10,000 crore. UCBs with deposits greater than ₹10,000 crore have been categorised in Tier 4, the round mentioned.

“If a UCB transits to a higher Tier on account of 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…,” the RBI mentioned.

RBI, in one other round, listed out the online value and capital adequacy necessities of the UCBs. Tier 1 UCBs working in a single district ought to have minimal web value of ₹2 crore. For all different UCBs (in Tier 1, 2 and three) tiers), the minimal web value ought to be ₹5 crore.

The UCBs, which at present don’t meet the revised minimal web value requirement, must obtain the minimal web value of ₹2 crore or ₹5 crore (as relevant) in a phased method, mentioned RBI. The central financial institution additionally prescribed minimal capital to threat weighted property ratio requirement for UCBs.

Tier 1 UCBs have to keep up a minimal capital to threat weighted property ratio of 9 per cent of Risk Weighted Assets (RWAs) on an ongoing foundation. Tier 2 to 4 UCBs have to keep up a minimal capital to threat weighted property of 12 per cent of RWAs on an ongoing foundation, the round mentioned.

With PTI inputs.

Catch all of the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
Download The Mint News App to get Daily Market Updates.

More
Less