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Which UCBs are classified as Financially Sound and Well Managed (FSWM)?

Reserve Bank of India (RBI) has revised the norms for classification of UCBs as Financially Sound and Well Managed (FSWM).

What is the basis of revised norms?

Reserve Bank of India (RBI) had constituted the Expert Committee on Urban Co-operative Banks on February 15, 2021, under the Chairmanship of Shri N. S. Vishwanathan, former Deputy Governor, RBI. Based on the recommendations of the committee, RBI has revised the regulatory framework for Urban Co-operative Banks (UCBs) [What is revised regulatory framework for Urban Co-operative Banks (UCBs)]?

What are the revised norms for classification of UCBs as FSWM?

The revised norms for classification of Primary (Urban) Co-operative Banks (UCBs) as Financially Sound and Well Managed (FSWM) are –

  • CRAR shall be at least 1% above the minimum CRAR applicable to an UCB as on the reference date.
  • Net NPA of not more than 3%.
  • Net profit for at least 3 out of the preceding 4 years subject to it not having incurred a net loss in the immediate preceding year.
  • No default in the maintenance of CRR / SLR during the preceding financial year,
  • Sound internal control system with at least 2 professional directors on the Board.
  • Core Banking Solution (CBS) fully implemented.
  • No monetary penalty should have been imposed on the bank on account of violation of RBI directives / guidelines during the last 2 financial years.

What is the process of classifying UCBs as FSWM?

  • The process of deciding the eligibility for being classified as a FSWM UCB may be carried out by UCBs themselves as per the revised criteria based on the assessed financials and findings of RBI inspection report or audited financial statements, whichever is latest. 
  • The Boards of the banks shall examine the compliance to the FWSM criteria and pass necessary resolution approving the same and inform the concerned Regional Office of RBI within 15 calendar days from the date of passing the resolution. 
  • UCBs may review the compliance with FSWM criteria every year at Board level immediately after the audit of the financial statements and RBI inspection report as and when received. 


References

Reserve Bank of India. (2022, December 01). 'Review of norms for classification of Urban Co-operative Banks (UCBs) as Financially Sound and Well Managed (FSWM)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12415&Mode=0


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