What changed
This master circular updates and consolidates all prior instructions on capital adequacy for UCBs issued up to April 19, 2023. It sets phased targets for minimum net worth: at least 50% of applicable minimum by March 2026 and full compliance by March 2028. For Tier 2-4 UCBs, CRAR must be at least 10% by March 31, 2024, 11% by March 31, 2025, and 12% by March 31, 2026.
What it means for you
UCBs must strengthen their capital buffers to absorb losses and maintain depositor confidence. Single-district UCBs need at least ₹2 crore net worth; others need ₹5 crore. Tier 2-4 UCBs face a tighter CRAR of 12%, up from 9%, requiring careful capital planning. Non-compliance could restrict business operations or licensing.
What you must do
- Assess current net worth and CRAR against the new phased targets.
- Develop a capital augmentation plan to meet net worth milestones by March 2026 and March 2028.
- For Tier 2-4 UCBs, ensure CRAR reaches 10% by March 2024, 11% by March 2025, and 12% by March 2026.
- Review eligibility of Tier I and Tier II capital components as per the circular's definitions.
- Submit required returns and maintain documentation for regulatory review.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Tier 1 UCBs (single-district and others), Tier 2 to 4 UCBs, UCB management and board of directors, Regulatory compliance teams at UCBs
What is the new minimum net worth requirement for UCBs?
UCBs operating in a single district must have minimum net worth of ₹2 crore. All other UCBs must have ₹5 crore. Banks not meeting these must achieve 50% by March 31, 2026, and full compliance by March 31, 2028.
What are the phased CRAR targets for Tier 2-4 UCBs?
Tier 2-4 UCBs must achieve CRAR of at least 10% by March 31, 2024, 11% by March 31, 2025, and 12% by March 31, 2026. Tier 1 UCBs continue with a minimum CRAR of 9%.
Does this circular change the definition of Tier I capital?
No, it consolidates existing definitions. Tier I capital includes paid-up share capital from voting members, contributions from associate/nominal members with withdrawal restrictions, and non-refundable admission fees held as reserves.