Reserve Bank of India (Urban Co-operative Banks - Prudential Norms on Capital Adequacy) Directions, 2025 (Updated as on June 16, 2026)
UR
- Applies toUrban co-operative banks
- StatusIn force
- IssuedNov 28, 2025
- Last amendedJun 24, 2026 · 2 incorporated
- Length55 points in 5 sections · 5 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNov 28, 2025The day this rule starts to apply, as RBI's own text states it.
- Time to get readyNoneIt starts to apply on the day it was published.
- Last date to actMarch 31, 2024The day by which the work this rule asks for must be finished. This document states 5 such dates; the earliest is shown.
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54 of the 55 points name no product and bind every product. All products.
Numbers to remember
| two crore rupees | A Tier 1 bank working in a single district needs two crore rupees of net worth. RBI Para 6 |
| twelve per cent | A bank in Tiers 2 to 4 must hold twelve per cent capital. RBI Para 9(2) |
| 35 per cent | Perpetual preference shares and debt together cannot exceed 35 per cent of Tier 1. RBI Para 12(1) |
| fifteen per cent | Perpetual debt counted in Tier 1 cannot exceed fifteen per cent of Tier 1. RBI Para 13(1) |
What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Chapter I. Preliminary
1. Capital rules for UCBs
This document sets how much capital urban co-operative banks must hold.
2. Start date
These Directions took effect on the day RBI issued them.
BankPulse example. There is no gap here between issue and effect. The Directions come into effect immediately upon issuance. A bank cannot wait for a separate start date, because there is none.
3. In force at once
The rules took effect the day they were issued. There was no grace period.
4. Who is covered
These Directions apply to every urban co-operative bank.
Chapter II. Regulatory capital
Must know
1. Two crore in one district
A Tier 1 bank working in a single district needs two crore rupees of net worth.
BankPulse example. A Tier 1 bank working in one district needs ₹2 crore of net worth. A bank working across two districts needs ₹5 crore. The same ₹5 crore applies to every other tier.
2. Bigger tiers hold twelve
A bank in Tiers 2 to 4 must hold twelve per cent capital.
3. Capital ladder to 2026
A bank short of capital must climb to ten, then eleven, then twelve per cent.
4. Perpetual paper capped
Perpetual preference shares and debt together cannot exceed 35 per cent of Tier 1.
5. No put option allowed
Perpetual non-cumulative preference shares cannot carry a put option.
6. No put or step up
These instruments cannot carry a put option or a step up option.
7. Missed dividend is lost
A dividend missed is never paid in a later year, whatever the profit then.
8. Short payment not made up
If less than the set rate is paid, the shortfall is never made good.
9. No loan to buy them
No loan may be given to any person to buy this paper.
10. Not a lending security
The issuer cannot lend against the security of its own instrument.
11. Debt limb capped at fifteen
Perpetual debt counted in Tier 1 cannot exceed fifteen per cent of Tier 1.
12. Report a lock in
Every use of the lock in clause must be reported to the regulator.
13. Tier 2 stays smaller
Tier 2 capital may never be larger than Tier 1 capital.
BankPulse example. Tier 2 capital may not exceed 100 per cent of Tier 1. Suppose Tier 1 is ₹300 crore. Then Tier 2 counts to ₹300 crore, and anything beyond that does not.
14. Holder cannot force repayment
The investor cannot demand redemption of these shares.
Do it
15. Half by 2026
A bank short of the net worth must reach half of it by 31 March 2026.
16. Accountant must certify
A chartered accountant must certify that the offer document follows these rules.
17. Fully paid and unsecured
The instrument must be fully paid, unsecured and free of restrictive clauses.
18. Other regulators still apply
Conditions set by the market regulator or any other authority must also be met.
19. Provide for losses first
Known and foreseeable losses must be provided for before this reserve counts.
Background
20. Capital has two tiers
Capital for this purpose is Tier 1 and Tier 2 only. Nothing else counts.
21. Risk assets are computed
Risk weighted assets are worked out under the paragraph named in the rule.
22. Revaluation reserve rule
A revaluation reserve rejected from Tier 1 is rejected from Tier 2 as well.
23. Bad debt reserve line
Appropriations to the bad and doubtful debt reserve come below the line.
24. Two tests for a fund
A fund enters Tier 1 only if it is an appropriation of profit and free.
25. Old perpetual debt counts
Innovative perpetual debt already issued still counts within the set ceilings.
26. Intangibles come off
Intangible assets, current losses and shortfalls in provisions are deducted.
27. Fund units are deducted
A holding in subordinated units of an alternative investment fund is deducted in full.
BankPulse example. A lender puts ₹10 crore into such a fund, as subordinated units. The whole ₹10 crore comes off capital funds. It is taken proportionately from Tier 1 and Tier 2 capital.
28. Guarantee money is deducted
A default loss guarantee given by the lender is taken out of its capital.
BankPulse example. A lender gives a default loss guarantee and ₹20 crore of it is still outstanding. The whole ₹20 crore comes off its capital. Nothing is left in on the ground that no loss has happened yet.
29. Apply through Pravaah
The application and offer document go to the Reserve Bank through the Pravaah portal.
30. Limit measured after goodwill
The ceiling is measured on Tier 1 after goodwill and intangibles are removed.
31. Board fixes the amount
The Board decides how much of the instrument may be raised.
32. Shown as capital
These instruments appear in the balance sheet under capital.
33. Where the holder ranks
These holders rank above equity but below every creditor and depositor.
34. No voting rights
An investor in these preference shares gets no vote.
35. No progressive discount
These instruments are not written down as they age.
36. Money before allotment
Money collected before allotment counts as a liability for reserve purposes.
37. Shown as borrowings
Perpetual debt is shown in the balance sheet as borrowings, not capital.
38. Holders rank together
Within the same class every investor ranks equally with the others.
39. Long deposits in Tier 2
Long term subordinated deposits already taken still count in Tier 2.
40. Coupon is interest
The coupon on these instruments is treated as interest in the accounts.
41. RBI approval to redeem
Every redemption of a capital instrument needs prior approval from RBI.
Chapter III. Computation of risk weighted asset (RWA)
1. Walkaway deals not netted
A contract with a walkaway clause cannot be netted when capital is worked out.
2. Charge has a ceiling
The capital charge cannot exceed what the exposure would cost if it had no guarantee.
Chapter IV. Other instructions
Must know
1. No deposit rate benchmark
A floating rate instrument cannot use the bank's own deposit rate as its benchmark.
Background
2. Older rules repealed
This document repeals RBI's earlier instructions on capital adequacy norms for urban co-operative banks.
3. Earlier repeals stand
Guidelines already repealed before these Directions stay repealed.
4. Old rules stay repealed
Rules repealed before this document was issued remain repealed.
5. Old actions preserved
Anything already done under the old rules stays governed by those old rules.
6. Approvals carried over
Approvals given under the cancelled rules are now treated as given under these rules.
7. Other laws still apply
These Directions add to other laws. They do not replace any of them.
8. RBI's reading final
RBI's interpretation of any part of these Directions is final and binding.
What RBI has fined people for under this rulebook
RBI has imposed 10 monetary penalties on this kind of lender. In each one its own stated reason names the subject of this rulebook. Each one links to the press release it was read from.
This tells you the rulebook RBI named. It does not tell you which of the points on this page was broken, because RBI does not say. Read the order itself before drawing any conclusion about your own bank.
May 04, 2026. Mogaveera Co-operative Bank Ltd., Mumbai — ₹20,000/- (Rupees Twenty Thousand only) ↗
Dec 01, 2025. The Arni Co-operative Town Bank Limited, Tamil Nadu — ₹2 lakh (Rupees Two Lakh only) ↗
These come from RBI press releases. The penalty tracker holds them all. It also lists the penalties we could not place on any rulebook, and the reason for each one.
How this rule has changed
The points above are the rule as it stands today, after every change listed here.
Issued on Nov 28, 2025. This is the date RBI put the rule out.
Changed on Jun 16, 2026.
- Risk weight for balance. The remaining loan amount must follow the current rules for deciding risk weight.
- Immediate effect. These changes apply from the date of this circular with no delay.
Changed on Jun 24, 2026.
- start date. These amended rules will apply from April 1, 2027.
- daily capital need. A UCB must hold capital for foreign exchange risk every business day close.
- capital exclusion items. No capital for foreign exchange risk is needed on items already deducted from regulatory capital or their hedges.
- matured or NPA securities. No foreign exchange capital is needed on matured unpaid or non-performing securities; they need only credit risk capital.
The same subject for other kinds of institution
The same subject for other kinds of institution.
Other RBI rules for urban co-operative banks
RBI compliance officer and compliance function rules for urban co-operative banks
RBI concurrent audit rules for urban co-operative banks 2026
RBI credit bureau reporting rules for urban co-operative banks 2025
RBI credit card and debit card rules for urban co-operative banks 2025
RBI customer service and fair conduct rules for urban co-operative banks 2025
RBI deposit interest rate rules for urban co-operative banks 2025
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