Capital Adequacy Norms for Primary (Urban) Co-operative Banks (UCBs)
The Reserve Bank of India has outlined prudential norms for Primary (Urban) Co-operative Banks (UCBs) to ensure their capital adequacy.
Statutory Requirements: UCBs must comply with the capital adequacy norms as per the Banking Regulation Act, 1949, and the Reserve Bank of India Act, 1934.
Capital Adequacy Norms:
Tier I Capital includes common equity tier I capital, which is the core equity capital of the bank.
Tier II Capital includes supplementary capital, comprising revaluation reserves, general provisions, and loss reserves.
Capital for Market Risk: UCBs must maintain capital for market risk, including risks associated with investments and foreign exchange transactions.
Share Linking to Borrowings: UCBs must ensure that shares are linked to borrowings to prevent excessive borrowing.
Refund of Share Capital: UCBs must refund share capital to members in case of withdrawal or cessation of membership.
Protection of Investors: UCBs must take measures to protect investors in regulatory capital instruments, as specified in Annex-II and Annex-III.
Returns: UCBs must submit regular returns to the Reserve Bank of India, including information on capital adequacy and compliance with prudential norms.
Guidelines on Issuance of Preference Shares: UCBs must follow guidelines on the issuance of perpetual non-cumulative preference shares (PNCPS) eligible for inclusion in Tier-I capital, including terms of issue, limits, amount, maturity, options, classification in the balance sheet, dividend, payment of dividend, seniority of claim, voting rights, discount, and other conditions.
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Download: Master Circular – Prudential Norms on Capital Adequacy – Primary (Urban) Co-operative Banks (UCBs)