The Reserve Bank of India had constituted the Expert Committee on Urban Co-operative Banks to examine the issues in urban cooperative banking sector and to review regulatory/ supervisory approach for strengthening the sector.
Based on the recommendations of the Expert Committee, RBI had released the Revised Regulatory Framework for Urban Co-operative Banks (UCBs) on July 19, 2022.
Accordingly, it has been decided to adopt a four-tiered regulatory framework, as against the existing two-tiered framework, for categorization of UCBs. Going forward, this categorization may be used for differentiated regulatory prescriptions aimed at strengthening the financial soundness of the UCBs.
The categorization of UCBs, based on their deposit size, are as following
UCBs have been categorized into following four tiers for regulatory purposes:
Tier 1 – All unit UCBs and salary earners’ UCBs (irrespective of deposit size), and all other UCBs having deposits up to ?100 crore;
Tier 2 – UCBs with deposits more than ?100 crore and up to ?1000 crore;
Tier 3 – UCBs with deposits more than ?1000 crore and up to ?10,000 crore;
Tier 4 – UCBs with deposits more than ?10,000 crore.
The instructions shall be applicable with immediate effect. This circular is applicable to all Primary (Urban) Co-operative Banks.
The deposits referred to above shall be reckoned as per audited balance sheet as on 31st March of the immediate preceding financial year.
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, if any, of the transited higher Tier.
