This has led to intensified scrutiny on UCBs, raising concerns about their governance and stability.
Urban Cooperative Banks (UCBs)
- About: It refers to primary cooperative banks located in urban and semi-urban areas.
- Legal Status: They are registered as cooperative societies under the State Cooperative Societies Act or the Multi State Cooperative Societies Act, 2002.
- Regulation and Supervision: The Reserve Bank of India (RBI) regulates and supervises the banking functions under the Banking regulation Act, 1949.
Key Issues with UCBs
- Low Capitalization: Many UCBs suffer from low capital adequacy, making them vulnerable to financial shocks.
- Governance Concerns: Cases of fraud and mismanagement have led to depositor anxiety.
- High Non-Performing Assets (NPAs): High levels of NPAs erode profitability and weaken the financial health of UCBs.
Measures taken for the Reform of UCBs
- New Prompt Corrective Action (PCA) Framework: RBI regulatory mechanism that imposes restrictions on financially weak UCBs to restore their financial health.
- National Urban Co-operative Finance and Development Corporation (NUCFDC): National level Umbrella organization for the UCBs to enhance their operational efficiency.
- Banking Regulation (Amendment) Act, 2020: RBI may supersede the Board of a cooperative bank under certain conditions.
- Others: Categorization of UCBs into four tiers, permission to issue shares etc.
