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RBI New Norms for UCBs

Published on January 07, 2020
Current context: RBI revised the Supervisory Action Framework (SAF) for urban cooperative banks (UCBs) on 6th January 2020.
RBI New Norms for UCBs 
  • The step is taken to ensure expeditious resolution of financial stress being faced by the UCBs, in the backdrop of the scam in Punjab and Maharashtra Cooperative (PMC) Bank causing distress to over 9 lakh depositors.
  • As per the revised norms, a UCB may come under SAF when:
    1. Its net NPAs exceed 6% of its net advances
    2. It incurs losses for two consecutive financial years or has accumulated losses on its balance-sheet.
  • The RBI will continue to monitor asset quality, profitability and capital/net worth of UCBs under the revised SAF.
  • Depending upon the stress severity, the RBI may ask them to curtail their lending powers, among other safeguards.
  • In case the normal functioning of the UCB no longer considered to be in the interest of its depositors/ public, RBI can consider the issue of show cause notice for cancellation of a banking license.

Question: 

Q.1 As per the revised Supervisory Action Framework of RBI, a UCB may come under SAF when its net NPAs exceed ______% of its net advances? 
a. 2%
b. 4%
c. 6%
d. 8%
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