With an aim to ensure expeditious resolution of financial stress, the Reserve Bank of India (RBI) has revised the Supervisory Action Framework (SAF) for urban cooperative banks (UCBs). The Apex bank will continue to monitor asset quality, profitability and capital/net worth of UCBs under the revised SAF.
As per the revised norms, a UCB may be placed under SAF when its net NPAs exceed 6 percent of its net advances. Depending on the severity of stress, the Reserve Bank may ask them to curtail their lending powers, among other safeguards. A UCB could also be placed under SAF when it incurs losses for two consecutive financial years or has accumulated losses on its balance sheet.
Further, the issue of show cause notice for cancellation of banking license may be considered by the Reserve bank when continued normal functioning of the UCB is no longer considered to be in the interest of its depositors/ public. The revised SAF will be implemented with immediate effect. Supervisory action already taken under the earlier SAF will be reviewed and revised instructions, if any, will be issued to the UCBs concerned.