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RBI imposes restrictions on several Urban Cooperative Banks (UCBs) | Current Affairs | Vision IAS
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RBI imposes restrictions on several Urban Cooperative Banks (UCBs)

Posted 16 Apr 2024

2 min read

  • RBI capped withdrawal limit of National Urban Co-operative Bank Ltd and Sarvodaya Co-operative Bank.
    • RBI said eligible depositors would be entitled to receive deposit insurance claim of Rs 5 lakh from Deposit Insurance and Credit Guarantee Corporation (DICGC).
      • Established under DICGC act, 1961, DICGC ensures all commercial banks including branches of foreign banks functioning in India, local area banks, and regional rural banks.

 

  • Urban Cooperative Banks (UCBs)
    • Refer to primary cooperative banks located in urban and semi-urban areas.
    • Registered as cooperative societies under either respective State Cooperative Societies Act or Multi-State Cooperative Societies Act, 2002.
    • RBI’s regulatory framework categorizes UCBs into 4 tiers. 
  • Issues regarding UCBs 
    • Inadequate capital base and low capital adequacy ratios.
    • High gross non-performing assets ratio of 8.7% in UCBs.
    • Lack of uniformity in regulation.
    • Influence of political interests in management.

 

  • Steps Undertaken for UCBs
    • Banking Regulation (Amendment) Act, 2020 brought management, governance, winding up, etc. under RBI’s purview. 
    • Supervisory Action Framework for expeditious resolution of financial stress faced by UCBs.
    • National Federation of Urban Co-operative Banks and Credit Societies Ltd., established as Umbrella Organization for UCB sector.

 

Dual Regulation of UCBs

  • RBI regulates and supervises banking functions under the Banking Regulation Act, of 1949.
  • State/ Central Registrar of Cooperative Societies supervises managerial, administrative, and, other matters.
  • Tags :
  • UCB
  • Regulation of cooperative banks
  • Banking Regulation (Amendment) Act, 2020
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