RBI Unveils New Corrective Action Framework for Urban Cooperative Banks, Effective April 2025

The Reserve Bank of India (RBI) has introduced a new corrective action framework for primary Urban Cooperative Banks (UCBs), effective April 1, 2025. This framework will replace the previous supervisory action framework, last updated in January 2020.

The new framework is designed as an early intervention tool for UCBs facing financial stress, aiming to prompt necessary improvements within these institutions. It has been aligned with similar frameworks for Scheduled Commercial Banks and Non-Banking Financial Companies, with appropriate modifications based on the “principle of proportionality.”

The RBI stated that the revised framework will allow for more flexibility in crafting entity-specific supervisory action plans based on individual risk assessments. The goal is to enable timely supervisory intervention and require UCBs to take prompt remedial actions to restore their financial health. However, the RBI retains the authority to take additional actions beyond those prescribed in the framework if necessary.

The framework applies to UCBs in Tier 2, Tier 3, and Tier 4 categories, while Tier 1 UCBs are currently excluded from this corrective action framework but will continue to undergo enhanced monitoring under the existing supervisory guidelines. The revised approach is expected to focus more intensively on larger UCBs, optimizing supervisory resources.

(With ANI Inputs)

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