What changed
RBI updated the FSWM classification criteria for UCBs, replacing the 2015 norms. The revised criteria require CRAR at least 1% above the minimum, net NPA ≤3%, net profit in 3 of last 4 years with no net loss in the immediate preceding year, no CRR/SLR default in the preceding financial year, sound internal controls with at least two professional directors, full CBS implementation, and no monetary penalty for RBI violations in the last two financial years. UCBs can now self-classify as FSWM based on audited financials or RBI inspection reports, subject to board resolution and notification to RBI within 15 calendar days.
What it means for you
For UCBs, this self-certification process reduces regulatory burden but increases accountability—boards must rigorously verify compliance annually. Stricter thresholds (e.g., CRAR buffer, NPA cap) may disqualify weaker banks from FSWM status, limiting their operational flexibility. Lenders should note that FSWM status signals stronger financial health, potentially affecting credit assessments and interbank dealings.
What you must do
- Review your UCB's current financials against the revised FSWM criteria (CRAR, NPA, profitability, CRR/SLR compliance, CBS, professional directors, penalty history).
- If eligible, pass a board resolution confirming compliance and submit it to the concerned RBI Regional Office within 15 calendar days.
- Establish an annual review process at the board level immediately after audit and receipt of RBI inspection report to maintain FSWM status.
- Ensure CBS is fully implemented and at least two professional directors are on the board to meet the new requirements.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Boards of UCBs, RBI Department of Supervision (Regional Offices)
What is the key change in the revised FSWM criteria?
UCBs can now self-classify as FSWM based on revised criteria, including CRAR at least 1% above minimum, net NPA ≤3%, and profitability in 3 of last 4 years with no net loss in the immediate preceding year. The board must pass a resolution and inform RBI within 15 calendar days.