RBI Issues New Supervisory Framework for Urban Cooperative Banks

The Reserve Bank of India (RBI) has introduced a new Prompt Corrective Action (PCA) framework for Urban Cooperative Banks (UCBs), effective from April 1, 2025. The PCA framework aims to enable timely supervisory intervention to restore financial health and replaces the Supervisory Action Framework (SAF). It focuses on capital, asset quality, and profitability.

The Reserve Bank of India (RBI) has unveiled a new Prompt Corrective Action (PCA) framework targeted at Urban Cooperative Banks (UCBs), set to take effect on April 1, 2025. This initiative aims to ensure timely supervisory intervention to help these banks restore and maintain financial stability.

The newly introduced PCA framework will supplant the existing Supervisory Action Framework (SAF), which was last updated in January 2020. This revised framework is designed to offer more flexibility by allowing entity-specific supervisory action plans based on individual risk assessments on a case-by-case basis.

Key areas of focus under the new PCA framework include capital, asset quality, and profitability. It will apply to all UCBs except the smaller ones categorized as Tier 1. The RBI stated that the updated framework is intended to align more closely with those of Scheduled Commercial Banks and Non-Banking Financial Companies, while maintaining strong supervisory rigor.

(With inputs from agencies.)