What changed
This master circular replaces the previous one dated July 1, 2009, consolidating all capital adequacy instructions issued up to June 30, 2010. No new policy changes are introduced; it is a compilation of existing guidelines for ease of reference.
What it means for you
UCBs must continue to maintain minimum capital as per Section 11 of the Banking Regulation Act and adhere to share-linking norms (5% for unsecured, 2.5% for secured borrowings). The circular reinforces Basel I-based capital adequacy with 9% minimum CRAR, tiered capital, and risk weights from 0% to 127.5%.
What you must do
- Review and ensure compliance with the updated master circular for capital adequacy norms.
- Verify that share-linking to borrowings is applied correctly (5% unsecured, 2.5% secured, with SSI concessions).
- Maintain minimum CRAR of 9% with proper classification of Tier I and Tier II capital.
- Submit required returns as per the proforma in Annex 2 of the circular.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Chief Executive Officers of UCBs, Compliance and risk management teams of UCBs
What is the minimum capital requirement for a UCB under this circular?
Under Section 11 of the Banking Regulation Act, a UCB must have paid-up capital and reserves of at least ₹1 lakh. Additionally, entry point norms prescribed by RBI apply for new banks.
How is share-linking to borrowings calculated?
For unsecured borrowings, members must hold shares worth 5% of the borrowing amount. For secured borrowings, it is 2.5%. For SSI secured borrowings, 1% is collected initially and 1.5% over two years. The maximum shareholding per member is capped at 5% of the bank's total paid-up capital.
Does this circular introduce new capital adequacy requirements?
No, it is a consolidation of existing instructions issued up to June 30, 2010, replacing the previous master circular. No new requirements are added.