On Jul. 26, 2024, IND RBI issued notice re PCA framework for UCBs as outlined in Cir.
Mandates copy of PCA framework must be presented to board of directors in their next meeting, and confirmation of this must be sent to the senior supervisory manager.
UCBs under SAF based on previous circular will continue to be governed by imposed restrictions, until individually assessed for transition to PCA or exit from SAF.
On Jan. 6, IND RBI revised framework for urban co-operative banks.
IND RBI issued a circular on revising the supervisory action framework (SAF) for primary (urban) co-operative banks (UCBs), which was last revised in Nov. 27, 2014.
Supervisory Action Framework
The SAF for UCBs, first introduced on Mar. 1, 2012, initially requires the management of the UCBs to take self-corrective action if the bank's financial position deteriorates.
IND RBI takes supervisory action in 2 stages if the financial position does not improve.
The SAF was subsequently revised on Nov. 24, 2014, to facilitate early rectification of bank irregularities/deficiencies, with adjustments re the triggers, regulatory action.
Further Revisions
Will make the SAF more effective in bringing about the desired improvement in the UCBs and also expeditious resolution of UCBs experiencing financial stress.
Will still monitor the asset quality, profitability, and capital / net worth of UCBs.
Adjustments have been made re the triggers/thresholds and supervisory action.
Effectiveness
Revised SAF will be implemented with immediate effect.
Supervisory action already taken under the earlier SAF will be reviewed, and revised instructions, if any, will be issued to the relevant UCBs by IND RBI.
Jul. 26, 2024 New Framework
On Jul. 26, 2024, IND RBI issued Prompt corrective action (PCA) framework for UCBs.
PCA framework replaces SAF above, designed as an early intervention tool for UCBs.
It is harmonized with those for scheduled commercial banks and non-banking financial companies, with modifications that are based on the principle of proportionality.
The PCA is more principle-based, with fewer parameters than the SAF and allows for tailored supervisory actions based on individual risk assessments of banks.
Removes the fixed INR 25k limit on capital expenditure under SAF, granting supervisors the authority to set limits based on their assessment of each UCB.
Applies to Tier 2, Tier 3, Tier 4 UCBs, excluding those under all inclusive directions; Tier 1 UCBs are currently exempt but will remain under enhanced monitoring.
Aims to intensively monitor larger UCBs to optimally use supervisory resources.
The provisions of the PCA framework will be effective on/from Apr. 1, 2025.
Jul. 26, 2024 Notification
On Jul. 26, 2024, IND RBI issued notice re PCA framework for UCBs as outlined in Cir.
Mandates copy of PCA framework must be presented to board of directors in their next meeting, and confirmation of this must be sent to the senior supervisory manager.
UCBs under SAF based on previous circular will continue to be governed by imposed restrictions, until individually assessed for transition to PCA or exit from SAF.
Regulators
IND RBI
Entity Types
Bank; Thrift
Reference
Nt RBI/2024-25/55, DOS.CO.PPG.SEC.No.8/11.01.005/2024-25, PR 2024-2025/778, Cir RBI/2024-25/55, DOS.CO.PPG.SEC.No.8/11.01.005/2024-25, 7/26/2024; Cir RBI/2019-20/135, DOR (PCB).BPD. Cir No. 9/12.05.001/2019-20, 1/6/2020; Cir, RBI/2014-15/323, DCBR.BPD.(PCB).Cir No.3/12.05.001/2014-15; Cir, RBI/2011-12/420, UBD.BPD. (PCB). Cir.No. 22/12.05.001/2011-12; BRA
