As per the RBI’s master circular updates on prudential norms on capital adequacy, issued on Thursday, Urban Cooperative Banks (UCBs) will have a minimum net worth as under: Tier 11 UCBs operating in a single district shall have a minimum net worth of Rs 2 crore. All other UCBs (of all tiers) shall have a minimum net worth of Rs 5 crore. UCBs which currently do not meet the minimum net worth requirement, as above, shall achieve the minimum net worth of Rs 2 crore or Rs 5 crore (as applicable) in a phased manner. Such UCBs shall achieve at least 50 per cent of the applicable minimum net worth on or before March 31, 2026, and the entire stipulated minimum net worth on or before March 31, 2028.
Tier 1 UCBs shall maintain, as hitherto, a minimum CRAR of 9% of Risk Weighted Assets (RWAs) on an ongoing basis. Tier 2 to 4 UCBs shall maintain a minimum CRAR of 12% of RWAs on an ongoing basis. UCBs in Tier 2 to 4, which do not currently meet the revised CRAR of 12% of RWAs, shall achieve the same in a phased manner. Such UCBs shall achieve the CRAR of at least 10% by March 31, 2024, 11% by March 31, 2025, and 12 per cent by March 31, 2026. Balances in the Investment Fluctuation Reserve shall be eligible for inclusion in Tier II capital.
UCBs may issue specified Upper Tier-II instruments – Perpetual Cumulative Preference Shares (PCPS), Redeemable Non-Cumulative Preference Shares (RNCPS) and Redeemable Cumulative Preference Shares (RCPS); specified Lower Tier-II instruments – Long Term Subordinated Bonds (LTSB). Borrowings from UCBs shall be linked to shareholdings of the borrowing members as: (i) 5% of the borrowings if the borrowings are on an unsecured basis. (ii) 2.5% of the borrowings, in case of secured borrowings. (iii) In the case of secured borrowings by Micro and Small Enterprises (MSEs), 2.5% of the borrowings, of which 1% is to be collected initially and the balance of 1.5% is to be collected in the course of the next two years.
