What changed
This master circular updates and consolidates all instructions on capital adequacy for UCBs issued up to June 30, 2013, replacing the previous circular from July 2, 2012. It reaffirms existing norms on share linking to borrowings and capital adequacy, with no new substantive changes introduced.
What it means for you
UCBs must continue to adhere to the statutory minimum capital of ₹1 lakh and entry point norms for new banks. The share linking norms remain in place, with exemptions for banks maintaining a 12% CRAR continuously. Banks need to ensure compliance with Basel I-based risk weights for CRAR computation and submit required returns.
What you must do
- Ensure paid-up capital and reserves meet the statutory minimum of ₹1 lakh under Section 11 of the Banking Regulation Act.
- Apply share linking norms: 5% for unsecured borrowings, 2.5% for secured borrowings, with SSI-specific phased collection.
- Maintain CRAR of at least 9% (or higher as prescribed) using Basel I risk weights for on- and off-balance sheet items.
- Submit capital adequacy returns as per the proforma in Annex 2 of the circular.
- Review eligibility for exemption from mandatory share linking if CRAR is 12% or above on a continuous basis.
Who it affects
All Primary (Urban) Co-operative Banks, Borrowing members of UCBs, RBI supervisory teams monitoring UCB compliance
What is the minimum capital requirement for a UCB under this circular?
Section 11 of the Banking Regulation Act requires aggregate paid-up capital and reserves to be at least ₹1 lakh. Additionally, entry point norms for new banks are prescribed separately by RBI.
Are UCBs with high CRAR exempt from share linking?
Yes, UCBs that maintain a CRAR of 12% on a continuous basis are exempted from mandatory share linking norms effective November 15, 2010.
What risk weights are used for CRAR computation?
The circular references Basel I framework with risk weights for different asset categories as detailed in Annex 1. Banks must apply these to both on-balance sheet and off-balance sheet exposures.