Page 21 - Banking Finance May 2023

Crisis-ridden cooperative The regulator has been keeping a Net Worth and Capital Adequacy -- is
watchful eye on the cooperative bank- applicable to all primary UCBs. These
banks continue to face
ing sector for many years. In 2022, the instructions were to come into effect
RBI's strictures central bank cancelled the license of 12 on April 1, 2023.
banks. A year before that, in 2021, RBI
India's crisis-ridden cooperative banks Under the revised norms, the RBI has
cancelled the license of three banks. In
continue to face the wrath of the regu- categorised all unit UCBs into a four-
2020, two cooperative banks were told
lator, which cancelled the license of tier structure. Banks having deposits up
to shut shop.
eight and imposed monetary penalties to Rs 100 crore have been placed in
114 times on wrongdoers in FY 2023, tier 1.
a Moneycontrol analysis showed. Capital adequacy ratio
In tier 2, there will be UCBs with de-
Cooperative banks, which have played norms enforcement for posits between over Rs 100 crore and
a critical role in extending banking ser- up to Rs 1,000 crore. Tier 3 will cover
UCBs advanced to FY23-
vices in villages and semi-rural areas, banks with deposits over Rs 1,000 crore
end
have been dealing with a range of is- and up to Rs 10,000 crore. UCBs with
sues from dual regulation and weak In a surprise move, the Reserve Bank deposits of more than Rs 10,000 crore
finances to interference by local politi- of India (RBI) advanced by a day the have been categorised in tier 4.
cians. The Reserve Bank of India (RBI) enforcement of capital adequacy and The RBI said cooperative banks in tier
has been clamping down on errant net worth norms for urban co-opera- I shall have a minimum net worth of
cooperative banks. tive banks (UCBs), from the earlier date Rs 2 crore. All other UCBs (of all tiers)
of April 1, 2023.
The banks whose permits were can- shall have a minimum net worth of Rs
celled by the RBI in FY 2023 were It has been decided that the instruc- 5 crore. For UCBs, which do not meet
tions shall come into effect on March the net worth norms, the RBI gave a
Mudhol Cooperative Bank, Millath Co-
31. All other instructions of the circu- glide path until March 31, 2028, to
operative Bank, Shri Anand Coopera-
tive Bank, Rupee Cooperative Bank, lar dated December 1, 2022, remain comply with revised norms.
Deccan Urban Cooperative Bank, unchanged, the RBI said in its latest Such UCBs shall achieve at least 50 per
Laxmi Cooperative Bank, Seva Vikas circular. cent of the applicable minimum net
Cooperative Bank and Babaji Date According to UCB executives, the RBI's worth on or before March 31, 2026,
Mahila Urban Bank. move may put banks in a difficult posi- and the entire stipulated minimum net
tion as only a few days are left to re- worth on or before March 31, 2028.
Reasons for cancellation varied from
figure the norms' enforcement.
inadequate capital to failure to com- Such UCBs shall achieve the CAR of at
ply with legal regulations under the In December 2022, the RBI said the least 10 per cent by March 31, 2024,
Banking Regulation Act and lack of circular -- Revised Regulatory Frame- 11 per cent by March 31, 2025, and 12
earning prospects in the future. work for Urban Co-operative Banks - per cent by March 31, 2026.

20 | 2023 | MAY | BANKING FINANCE