RBI Rolls Out New Corrective Action Framework for Urban Cooperative Banks Effective 2025

The Reserve Bank of India has unveiled a prompt corrective action framework for Urban Cooperative Banks, effective April 1, 2025, replacing the prior supervisory framework. The initiative aims to ensure timely financial intervention and stabilization, tailored to the risk profile of each bank.

The Reserve Bank of India (RBI) has announced a new corrective action framework for primary Urban Cooperative Banks (UCBs), set to take effect from April 1, 2025. This was stated by the central bank in a statement released on Friday.

Aimed at financially stressed UCBs, the framework serves as an early intervention tool to foster necessary improvements. Replacing the supervisory framework last revised in January 2020, the new guidelines are designed to address financial risks on a case-by-case basis.

According to the RBI, this updated framework aligns closely with similar protocols for Scheduled Commercial Banks and Non-Banking Financial Companies, with adjustments made for proportionality. The institution highlighted the framework's flexibility in tailoring supervisory action plans based on individual risk assessments.

The objective of the new PCA Framework is to enable timely supervisory intervention, requiring UCBs to implement remedial measures to restore financial health promptly. While this framework applies to urban cooperative banks in Tiers 2, 3, and 4, those in Tier 1 are currently exempt but will remain under enhanced monitoring.

The RBI emphasized that despite the new framework's implementation, it retains the authority to take any additional actions deemed necessary at any time. The updated framework is expected to focus more intensively on larger UCBs, aiming for optimal utilization of supervisory resources, according to the RBI.

(With inputs from agencies.)