What changed
The eligibility criteria for including UCBs in the Second Schedule have been updated to match the Revised Regulatory Framework for UCBs announced in July 2022. Now, only licensed Tier 3 and Tier 4 UCBs that meet the Financially Sound and Well Managed criteria and maintain minimum deposits required for Tier 3 categorization for two consecutive years are eligible. Additionally, applicants must have a CRAR at least 3% above the minimum requirement and no major regulatory or supervisory concerns.
What it means for you
This revision tightens the path for UCBs to gain Scheduled Bank status, linking it directly to financial soundness and tier classification. Banks that are not Tier 3 or 4, or fail to meet the FSWM criteria, will no longer qualify. For lenders, this raises the bar for regulatory recognition and may affect their access to certain privileges like borrowing from RBI or clearing house membership.
What you must do
- Assess your UCB's current tier classification and FSWM status against the new norms.
- Ensure CRAR is maintained at least 3% above the minimum requirement for your tier.
- Prepare documentation including board resolution and last three years' audited balance sheets for application.
- Submit application to the concerned RBI Regional Office (or Central Office for Mumbai jurisdiction).
Who it affects
Primary (Urban) Co-operative Banks, Tier 3 and Tier 4 UCBs seeking Scheduled Bank status, RBI supervisory departments handling UCB applications
What is the minimum CRAR requirement for a UCB to be eligible under these new norms?
The UCB must have a CRAR at least 3% higher than the minimum CRAR requirement applicable to it, based on the latest RBI inspection or audited financials.
Can a Tier 1 or Tier 2 UCB apply for inclusion in the Second Schedule under this circular?
No, only licensed Tier 3 and Tier 4 UCBs that meet the Financially Sound and Well Managed criteria and have maintained minimum Tier 3 deposits for two consecutive years are eligible.
What documents are needed to apply for Second Schedule inclusion?
You need a board resolution authorizing the application and naming authorized officials, plus the bank's published balance sheets for the last three years.