RBI harmonises provisioning norms for urban cooperative banks

The Reserve Bank of India (RBI) announced that it has unified the provisioning norms for standard assets across all categories of urban cooperative banks (UCBs). In December 2020, the RBI had classified UCBs into four tiers, namely tier 1, 2, 3, and 4, for regulatory purposes. Prior to this, these banks were only categorized as tier 1 and tier 2. In a circular, the RBI stated, “On review, it has been decided to harmonize the provisioning norms for standard assets applicable to all categories of UCBs, irrespective of their tier in the revised framework.”

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Here are the key points of the RBI circular:

• The RBI has harmonised the provisioning norms for standard assets across all categories of UCBs.
• Direct advances to agriculture and SME sectors that are standard would attract a uniform provisioning requirement of 0.25 per cent of the funded outstanding on a portfolio basis to all categories of UCBs under the revised framework.
• Advances to the commercial real estate (CRE) sector that are standard would attract a uniform provisioning requirement of 1 per cent of the funded outstanding on a portfolio basis.
• For the Commercial Real Estate-Residential Housing Sector (CRE-RH) and all other loans and advances, the provisioning requirements would be 0.75 per cent and 0.4 per cent, respectively.
• The RBI has categorised all unit UCBs and salary earners’ UCBs (irrespective of deposit size), and all other UCBs having deposits up to Rs 100 crore in tier 1.
• UCBs with deposits more than Rs 100 crore and up to Rs 1,000 crore have been placed in tier 2.
• Banks with deposits more than Rs 1,000 crore and up to Rs 10,000 crore have been categorised in tier 3.
• UCBs with deposits more than Rs 10,000 crore have been categorised in tier 4.