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regulatory framework for Urban Co-operative Banks

UPSC CURRENT AFFAIRS | RESERVE BANK OF INDIA REVISES REGULATORY FRAMEWORK FOR URBAN CO-OPERATIVE BANKS (UCBS) | 21ST JULY | BUSINESS STANDARD

/ July, 2022, UPSC Daily Current Affairs

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