SYLLABUS SECTION: GS III (ECONOMY)
WHY IN THE NEWS?
Recently, RBI has decided to adopt a simple four-tiered regulatory framework for Urban Co-operative Banks (UCBs),
Based on size of deposits, with an aim to strengthen their financial soundness.
KEY POINTS ABOUT REGULATORY FRAMEWORK FOR URBAN BANKS:
- Four-tiered regulatory framework for Urban Co-operative Banks: UCBs are classified as Tier-1, Tier-2, Tier-3 and Tier-4,
- With differentiated regulatory prescriptions to strengthen the financial soundness of the existing UCBs
- UCBs which do not meet the requirement will be provided a glide path of five years to facilitate a smooth transition to the revised norms.
- Minimum net worth: ₹2 crore for Tier 1 UCBs and ₹5 crore for others to strengthen the financial resilience of the banks.
- Capital to Risk Weighted Assets Ratio (CRAR): Retained at 9% for Tier 1 UCBs and revised to 12% for others so as to strengthen their capital structure.
URBAN COOPERATIVE BANKS:
- UCBs are cooperative societies register under provisions of the respective State Cooperative Societies Act or Multi-state Cooperative Societies Act, 2002. UCBs are supervise under the Registrar of Cooperative Societies.
- However, the power to issue banking licenses and regulate, supervise and develop banking functions of UCBs are vests with the RBI by virtue of the Banking Regulation (BR) Act, 1949.
SOURCE: BUSINESS STANDARD