Established in February 2021, the panel was designed to examine issues in the urban cooperative banking sector and provide a medium-term road map. led by east reserve Bank of India Deputy Governor, NS Viswanathan, the panel recommended a four-tier regulatory framework based on banks’ deposits and their area of ​​operation.
Out of the recommendations of the panel, RBI has accepted the following:
- Four-tier regulatory framework with different regulatory prescriptions aimed at strengthening the financial soundness of existing UCBs with a minimum net worth of Rs 2 crore for Tier 1 UCBs operating in a single district and 5 for all other UCBs (of all tiers) Crore Rs.
- the minimum watch In order to strengthen the capital structure, the requirement of Tier 2, 3 and 4 UCBS has been revised to 12%. Tier 1 CRAR requirement remains at 9%.
- Automatic route for branch expansion to be introduced for UCBs
- A working group consisting of representatives of RBI, SEBI and Ministry of Cooperation was constituted to examine capital appreciation.
- The risk weight is to be determined on the basis of credit to value (LTV) ratio alone.
According to RBI these measures are designed to strengthen India’s UCB. Further, RBI said that most banks already comply with the requirement and those that do not will be provided a five-year glide path.
“This is expected to strengthen the financial flexibility of banks and enhance their ability to finance their growth,” the RBI release said.
With regard to the requirement of CRAR, RBI stated that a three-year glide path will be provided to banks not meeting the revised CRAR.