What are the RBI mandated changes that Urban Cooperative Banks will have to follow?

The RBI plans to modify exposure limits and priority sector lender norms for Urban Cooperative Banks. Here's everything you need to know.

What are the RBI mandated changes that Urban Cooperative Banks will have to follow?

The Reserve Bank of India (RBI) on Thursday announced a host of new measures to better regulate Urban Cooperative Banks (UCBs). This announcement has in response to the Punjab and Maharashtra Cooperative Bank (PMC) and HDIL scam of Rs 4,355 crore that has affected thousands of retail customers and has rocked the banking and finance sector.

What do the changes entail?

Making a statement on the Developmental and Regulatory Policies, the RBI plans to modify exposure limits and priority sector lender norms for UCBs. Additionally, UCBs with assets in excess of Rs 500 crore will have to report directly to RBI’s Central Repository of Information on Large Credits (CRILC), as other commercial banks do.

The CRILC system, which includes all commercial banks, as well as some NBFCs, enables RBI to conduct stringent offsite supervision and identify financial distress as early as possible. The guidelines on incorporating UCBs into the fold will be issued by December 31, 2019.

A spokesperson for the RBI said, “These measures are expected to strengthen the resilience and sustainability of UCBs and protect the interest of depositors. An appropriate timeframe will be provided for compliance with the revised norms.”

Related: ​​​​NBFCs and banks: How are they different?

What are the other key changes?

The RBI also plans on structuring a comprehensive cybersecurity framework for UCBs with a staggered approach, based on the UCBs digital product portfolio, total digital depth, synergies with the payment systems landscape and the susceptibility of their cybersecurity.

“The framework would mandate implementation of progressively stronger security measures based on the nature, variety and scale of digital product offerings of banks. This would bolster cybersecurity preparedness and ensure that the UCBs offering a range of payment services and higher Information Technology penetration are brought at par with commercial banks in addressing cybersecurity threats,” the RBI said.


Earlier in September, the RBI had issued draft guidelines for issuing ‘On Tap’ licences for Small Finance Banks (SFBs), and after deliberation and comments from various stakeholders, the norms for SFBs are about to be finalised. Take a look at what happens in case RBI puts restrictions on your bank.