What changed
RBI issued the Reserve Bank of India (Urban Co-operative Banks - Prudential Norms on Capital Adequacy) Directions, 2025, replacing previous versions. The directions set minimum net worth at ₹2 crore for single-district Tier-1 UCBs and ₹5 crore for all other UCBs, with phased implementation for non-compliant banks. They also define regulatory capital components, risk-weighted asset computation for credit and market risk, and reporting formats.
What it means for you
UCBs must now meet higher minimum net worth thresholds, which could pressure smaller banks to raise capital or merge. The phased approach gives time but requires proactive capital planning. Clear definitions of capital tiers and risk weights standardize compliance, impacting capital adequacy ratio calculations and reporting.
What you must do
- Assess your UCB's current net worth against the new ₹2 crore or ₹5 crore minimum and plan phased compliance if below threshold.
- Review and update capital adequacy policies to align with the revised definitions of Tier 1 and Tier 2 capital.
- Ensure risk-weighted asset computation frameworks cover credit and market risk as per the new directions.
- Prepare to submit capital ratio reports in the specified Annex II format.
Who it affects
Urban Co-operative Banks (UCBs) of all tiers, Tier-1 UCBs operating in a single district, UCBs currently below minimum net worth thresholds
What happens if my UCB does not meet the minimum net worth?
Such UCBs must achieve the required minimum in a phased manner, reaching at least 50% of the applicable threshold on or before March 31, 2026 and the entire stipulated minimum on or before March 31, 2028.