What changed
This master circular consolidates and updates all previous instructions on capital adequacy for UCBs issued up to June 30, 2008, replacing earlier circulars. It reiterates the Basel I-based CRAR framework with phased targets, statutory capital requirements under Section 11 of the Banking Regulation Act, and share-linking norms for borrowings.
What it means for you
UCBs now have a single reference document for capital adequacy, reducing confusion from multiple circulars. Banks must ensure CRAR compliance with risk-weighted assets, including off-balance sheet items, and adhere to share-linking norms (5% for unsecured, 2.5% for secured borrowings). This reinforces the buffer role of capital for depositor confidence and crisis resilience.
What you must do
- Review and align your bank's capital adequacy framework with the consolidated master circular, including CRAR computation with phased targets (Scheduled: 8% by 31.03.2002, 9% by 31.03.2003; Non-Scheduled: 6% by 31.03.2002, 7% by 31.03.2003) and risk weights.
- Ensure share-linking norms are correctly applied: 5% for unsecured borrowings, 2.5% for secured, and 2.5% for SSI secured (1% initial, 1.5% over 2 years).
- Submit required returns on capital adequacy as per Annex 2 of the circular.
- Monitor capital funds to maintain minimum statutory capital of at least ₹1 lakh in paid-up capital and reserves as per Section 11 of the Banking Regulation Act.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Chief Executive Officers and compliance teams of UCBs, Regulatory reporting departments in UCBs
What is the minimum CRAR requirement for UCBs under this master circular?
The circular references the Basel I framework with phased CRAR targets: Scheduled UCBs 8% by 31.03.2002 and 9% by 31.03.2003; Non-Scheduled UCBs 6% by 31.03.2002 and 7% by 31.03.2003. UCBs must maintain these CRAR levels.