What changed
This master circular consolidates all prior instructions on capital adequacy for UCBs issued up to March 31, 2024, replacing the April 2023 circular. It reaffirms minimum net worth requirements of ₹2 crore for single-district UCBs and ₹5 crore for others, with phased targets: 50% by March 2026 and full by March 2028. CRAR norms remain at 9% for Tier 1 UCBs and 12% for Tiers 2-4, with interim milestones for those not yet compliant.
What it means for you
UCBs must now plan capital raising or retention to meet net worth and CRAR deadlines, especially those in Tiers 2-4 needing 12% CRAR by March 2026. Non-compliance could restrict business growth or invite regulatory action. Banks should review their capital instruments (e.g., preference shares, debt capital) as per Annex 3 and 4 guidelines.
What you must do
- Assess current net worth against ₹2 crore (single-district) or ₹5 crore (others) and ensure 50% by March 2026, full by March 2028.
- Check CRAR compliance: Tier 1 UCBs need 9% ongoing; Tiers 2-4 must hit 10% by March 2024, 11% by March 2025, and 12% by March 2026.
- Review Tier II capital limit (max 100% of Tier I) and risk weights in Annex 2 for accurate RWA computation.
- Update internal policies for issuance of preference shares or debt capital instruments per Annex 3 and 4 investor protection measures.
- File returns as per Annex 5 proforma and ensure all capital adequacy data is reported correctly.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Tier 1 UCBs (single-district and others), Tiers 2 to 4 UCBs, UCBs not meeting minimum net worth or CRAR thresholds
What is the minimum net worth requirement for a UCB operating in a single district?
A UCB operating in a single district must have a minimum net worth of ₹2 crore. Other UCBs need ₹5 crore. Banks below these levels must achieve 50% by March 31, 2026, and full compliance by March 31, 2028.
What are the CRAR targets for Tier 2 to 4 UCBs and their deadlines?
Tier 2 to 4 UCBs must maintain a minimum CRAR of 12% of RWAs. Those not yet compliant must achieve 10% by March 31, 2024, 11% by March 31, 2025, and 12% by March 31, 2026.
Can Tier II capital exceed Tier I capital for CRAR compliance?
No, the total of Tier II capital is limited to a maximum of 100% of total Tier I capital for the purpose of compliance with CRAR norms.