RBI implements 4 tiered regulatory norms for Urban Cooperative Bank

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Reserve Bank of India (RBI) has notified a four tier structure for Urban Co-Operative Banks (UCB) in India on 1 December 2022. Earlier the UCB in India were divided into two categories by the RBI.

Committee on UCB 

Reserve Bank of India (RBI) of India had set up an Expert Committee on Urban Co-Operative Banks on February 15, 2021 under the Chairmanship of Shri N. S. Vishwanathan, former Deputy Governor, Reserve Bank to examine the issues in the urban co-operative banking sector, and to suggest suitable changes to strengthen its regulation and supervision.

 New Categorisation of UCB in India 

RBI has now categorized Urban Co-Operative Banks in India into four tier depending upon the deposit with the bank

Tier 1: UCB are those banks having deposits up to Rs 100 crore operating in a single district or having branches in contiguous districts. 

Tier 2: UCBs with deposits more than Rs.100 crore and up to Rs.1000 crore.

Tier 3 - UCBs with deposits more than Rs.1000 crore and up to Rs.10, 000 crore. 

Tier 4 - UCBs with deposits more than Rs.10, 000 crore.

Minimum Net worth Requirement of the banks 

The minimum net worth (have a minimum capital and reserves) requirement for the Tier 1 UCBs operating in single districts shall be Rs 2 crore.

For other UCB it shall be Rs 5 crore.

Those UCBs which do not meet the requirement, have to achieve the minimum net worth of ₹2 crore or ₹5 crore in a phased manner in five years. The banks will have to achieve the 50% minimum net worth requirement in three years and the remaining 50% in next two years. 

What is a Primary Urban Co-operative Bank? 

Primary Co-operative Banks, popularly known as Urban Cooperative Banks (UCBs) are registered as cooperative societies under the provisions of, either the State Cooperative Societies Act of the State concerned under the provisions of the or the Multi State Cooperative Societies Act, 2002. 

Who regulates the UCB?

There is a duality of control over the UCB. It is regulated by the Registrar of Cooperatives and also by the RBI.

UCB registered under the State Cooperative Societies Act are regulated and supervised by the Registrar of Cooperative Societies (RCS) of the State concerned.  

UCB which are set up under the Multi State Cooperative Societies Act, 2002 are regulated by the Central Registrar of Cooperative Societies (CRCS).

Regulation of banking function 

The Banking Regulation Act 1949 was made applicable on these banks from 1 March 1966.

The Reserve Bank regulates and supervises the banking functions of UCBs under the provisions of Banking Regulation Act, 1949.