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Framework will replace the existing Supervisory Action Framework (SAF), and will be effective from April 1, 2025.
- The PCA framework has been harmonized with similar frameworks applicable to scheduled commercial banks and non-banking financial companies.
Key features of the framework
- Objective: to address the financial health of UCBs with greater precision and flexibility.
- Application: to all UCBs in tier 2, tier 3, and tier 4 categories, with the exception of those under All Inclusive Directions (AID).
- Capital, Asset Quality and Profitability of UCBs will be the key areas for monitoring.
- A financially unsound and ill-managed UCB can be brought under PCA if it breaches the risk thresholds.
- The exit from PCA and withdrawal of Restrictions: if no breaches in risk thresholds in any parameters are observed as per four successive quarterly financial statements.
Challenges of UCBs
- High gross non-performing assets (GNPA) and dual control.
- Lack of professional management and acute market competition with Small Finance Banks (SFBs), FinTechs, etc
- Concentrated in few states (mostly in Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu).
About Urban Co-operative Banks
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