RBI imposes restrictions on several Urban Cooperative Banks (UCBs)

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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.

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.

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