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    Question

    Direction (11 to 13):-   Read the following information to answer the questions below: Given the heterogeneity in the cooperative sector, a tiered regulatory framework was required to balance the spirit of mutuality and co-operation more prevalent in banks of smaller sizes and those with limited area of operation vis-à-vis the growth ambitions of the large-sized Urban Cooperative Banks to spread their area of operation and undertake more complex business activities. The Reserve Bank of India had constituted the Expert Committee on Urban Co-operative Banks to examine the issues in urban cooperative banking sector and to review regulatory/ supervisory approach for strengthening the sector. Based on the recommendations of the Expert Committee, RBI had released the Revised Regulatory Framework for Urban Co-operative Banks (UCBs) on July 19, 2022. Accordingly, it was decided to adopt a four-tiered regulatory framework, as against the then existing two-tiered framework, for categorization of UCBs. Going forward, this categorization would be used for differentiated regulatory prescriptions aimed at strengthening the financial soundness of the UCBs.

    Which of the following is NOT a criterion for determining the FSWM status of a UCB?

    A CRAR at least 1 percentage point above the minimum CRAR applicable Correct Answer Incorrect Answer
    B Net profit for at least three out of the preceding four years Correct Answer Incorrect Answer
    C Compliance with RBI directives/guidelines during the last two financial years Correct Answer Incorrect Answer
    D At least one professional director on the Board Correct Answer Incorrect Answer
    E Net NPA of not more than 3% Correct Answer Incorrect Answer

    Solution

    The FSWM criteria for UCBs include maintaining a.   The CRAR shall be at least 1 percentage point above the minimum CRAR applicable to an UCB as on the reference date; b.   Net NPA of not more than 3%; c.   Net profit for at least three out of the preceding four years subject to it not having incurred a net loss in the immediate preceding year; d.   No default in the maintenance of CRR / SLR during the preceding financial year; e.   Sound internal control system with at least two professional directors on the Board; f.    Core Banking Solution (CBS) fully implemented; and g.   No monetary penalty should have been imposed on the bank on account of violation of RBI directives / guidelines during the last two financial years.

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