RBI set to tighten norms for urban co-operative banks

The Reserve Bank of India (RBI) has tightened the norms for the urban co-operative banks, amid rising discrepancies in the sector.

As part of the multiple measures announced by the central bank, RBI has decided to bring UCBs with assets of Rs 500 crores and above under the Central Repository of Information on Large Credits (CRILC) reporting framework. Detailed instructions in this regard will be issued by December 31, 2019, the central bank said.

The central bank has created a CRILC of scheduled commercial banks, all India financial institutions and certain non-banking financial companies with multiple objectives, which, among others, include strengthening offsite supervision and early recognition of financial distress.

After the Punjab & Maharashtra Co-operative bank fallout, the RBI has also decided to amend the regulatory guidelines of the UCBs. The guidelines would primarily relate to exposure norms for single and group/interconnected borrowers, promotion of financial inclusion, priority sector lending, among others.

"These measures are expected to strengthen the resilience and sustainability of UCBs and protect the interest of depositors. An appropriate timeframe will be provided for compliance with the revised norms. A draft circular proposing the above changes for eliciting stakeholder comments will be issued shortly," the central bank said.

The move has been triggered by the PMC Bank crisis, wherein 75% of the bank's total loans outstanding were with just one entity -- embattled real-estate firm, HDIL.

The central bank has also decided to prescribe a comprehensive cybersecurity framework for the UCBs, as a graded approach, based on their digital depth and interconnectedness with the payment systems landscape, digital products offered by them and assessment of cybersecurity risk.

Such measures would, among others, include implementation of bank-specific email domain; periodic security assessment of public-facing websites/applications; strengthening the cybersecurity incident reporting mechanism; strengthening of governance framework; and setting up of Security Operations Center (SOC), the central bank said.

This would bolster cybersecurity preparedness and ensure that the UCBs offering a range of payment services and higher Information Technology penetration are brought at par with commercial banks in addressing cybersecurity threats, it added.

The Reserve Bank had prescribed a set of baseline cybersecurity controls for primary UCBs in October 2018.