Question

    Which of the following is NOT a criterion for

    determining the FSWM status of a UCB? Direction (11 to 13):-   Read the following information to answer the questions below: Given the heterogeneity in the cooperative sector, a tiered regulatory framework was required to balance the spirit of mutuality and co-operation more prevalent in banks of smaller sizes and those with limited area of operation vis-à-vis the growth ambitions of the large-sized Urban Cooperative Banks to spread their area of operation and undertake more complex business activities. The Reserve Bank of India had constituted the Expert Committee on Urban Co-operative Banks to examine the issues in urban cooperative banking sector and to review regulatory/ supervisory approach for strengthening the sector. Based on the recommendations of the Expert Committee, RBI had released the Revised Regulatory Framework for Urban Co-operative Banks (UCBs) on July 19, 2022. Accordingly, it was decided to adopt a four-tiered regulatory framework, as against the then existing two-tiered framework, for categorization of UCBs. Going forward, this categorization would be used for differentiated regulatory prescriptions aimed at strengthening the financial soundness of the UCBs.
    A CRAR at least 1 percentage point above the minimum CRAR applicable Correct Answer Incorrect Answer
    B Net profit for at least three out of the preceding four years Correct Answer Incorrect Answer
    C Compliance with RBI directives/guidelines during the last two financial years Correct Answer Incorrect Answer
    D At least one professional director on the Board Correct Answer Incorrect Answer
    E Net NPA of not more than 3% Correct Answer Incorrect Answer

    Solution

    The FSWM criteria for UCBs include maintaining a.   The CRAR shall be at least 1 percentage point above the minimum CRAR applicable to an UCB as on the reference date; b.   Net NPA of not more than 3%; c.   Net profit for at least three out of the preceding four years subject to it not having incurred a net loss in the immediate preceding year; d.   No default in the maintenance of CRR / SLR during the preceding financial year; e.   Sound internal control system with at least two professional directors on the Board; f.    Core Banking Solution (CBS) fully implemented; and g.   No monetary penalty should have been imposed on the bank on account of violation of RBI directives / guidelines during the last two financial years.

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