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RBI appointed panel suggests 4-tier structure for Urban Co-operative Banks.

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    26th Aug, 2021

A Reserve Bank-appointed committee has suggested a four-tier structure for the urban cooperative banks (UCBs) depending upon the deposits and prescribed different capital adequacy and regulatory norms for them based on their sizes.

Context

A Reserve Bank-appointed committee has suggested a four-tier structure for the urban cooperative banks (UCBs) depending upon the deposits and prescribed different capital adequacy and regulatory norms for them based on their sizes.

What are Urban Co-operative Banks?

  • Urban Co-operative Banks (UCBs) occupy an important place among the Non-Agricultural Credit Society.
  • They cater to the credit needs of people residing in urban areas. They advance loans mostly to the small traders, assistants and monthly income group people.
  • Urban co-operative banks are regulated and supervised by
    • State Registrars of Co-operative Societies (RCS) in case of single-state co-operative banks. 
    • Central Registrar of Co-operative Societies (CRCS) in case of multi-state co-operative banks and by the Reserve Bank.

Category

UCBs can be split into four categories

  • Tier-1 with deposits up to Rs 100 crore.
  • Tier-2 with deposits between Rs 100-Rs 1,000 crore.
  • Tier-3 with deposits between Rs 1,000 crore to Rs 10,000 ,must function like SFBs if they meet a capital adequacy ratio of 15%.
  • Tier-4 with deposits of over Rs 10,000 crore, should be allowed to function like universal banks if they meet the 9% capital adequacy ratio requirement, leverage ratio and have a fit and proper board and chief executive.
  • It has suggested that the minimum Capital to Risk-Weighted Assets Ratio (CRAR) for them could vary from 9 per cent to 15 percent.

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