Why in the News
- An internal working group of the Reserve Bank of India (RBI) has proposed stricter eligibility criteria for granting licences to Urban Cooperative Banks (UCBs).
Proposed Eligibility Criteria
To qualify for a UCB licence, credit cooperative societies must meet:
- Minimum capital: ₹300 crore
- Capital Adequacy Ratio (CAR): Above 12%
- Net Non-Performing Assets (NPAs): Below 3%
- Track record: At least 5 years of sound financial performance
Governance Reforms
- UCBs to adopt governance standards similar to commercial banks
- Requirements include:
- Professional management
- Independent board members
- Strong regulatory oversight
Current Status of UCB Sector
- Total weak UCBs under regulatory scrutiny: 82
- 28 UCBs under All-Inclusive Directions (AID)
- 32 UCBs under Prompt Corrective Action (PCA)
- 22 UCBs under Supervisory Action Framework (SAF)
Key Concerns
- Weak financial health of many UCBs
- Poor governance and management issues
- Rising NPAs and capital inadequacy
Significance of Reforms
- Strengthens financial stability
- Improves credibility of cooperative banking sector
- Protects depositors’ interests
- Aligns UCB regulation with banking sector standards
| [2021] With reference to ‘Urban Cooperative banks’ in India, consider the following statements: 1. They are supervised and regulated by local boards set up by the State Governments. 2. They can issue equity shares and preference shares. 3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966. Select the correct answer using the code given below: (a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2, and 3 |
