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RBI Issued Fresh Norms for Urban Co-operative Banks

Published on June 12, 2022
Current Context: The Central Bank issued fresh provisioning norms for urban cooperative banks' inter-bank exposure which relates to non-cumulative preference shares and equity warrants, and asked them to adjust by 20% for such exposures.
RBI Issued Fresh Norms for Urban Co-operative Banks
  • This decision has been taken due to the bankruptcy of the Punjab & Maharashtra Cooperative Bank in September 2019 and the subsequent merger of the cooperative bank with Unity Small Finance Bank, which came into effect on January 25, 2022.
  • Urban Co-operative Bank has the power to make provisions on inter-bank exposures arising from outstanding uninsured deposits, as of April 20, 2020.
  • It also said the new norms are applicable for all Urban Cooperative Banks (UCBs) and are in force with immediate effect.
  • The RBI has also said that after the allotment of equity warrants, provisions made on exposures arising from deposits will be reversed only if such provisions are more than the loss.
  • Besides Equity warrants shall be valued at a price of Re 1 per warrant, when they are converted into equity shares, the valuation will be based on market prices.
  • Apart from that, the RBI had capped the exposure at 20% for the next five years for UCBs for deposits placed by them under all-inclusive directions and their non-performing exposures.


Q.1 Which of the following banks has been given the power to make provisions on inter-bank exposures which are related to uninsured deposits?
a. Regional Rural Banks
b. Urban Co-operative Banks
c. Public Sector Banks
d. Private Sector Banks
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