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It was indicated in the Annual Policy Statement of May 2004 that fresh issuance of licences to Urban Cooperative Banks (UCBs) would be considered only after a comprehensive policy on UCBs, including an appropriate legal and regulatory framework for the sector, is put in place and a policy for improving the financial health of the UCB sector is formulated. As a sequel thereto, grant of licences for opening of new branches was also put on hold.
RBI allows Urban Cooperative Banks to open new branches/Extension Counters
Reserve Bank of India in its notification dated 4th July 2007 has decided to allow Urban Cooperative Banks (UCBs) to open new branches/Extension Counters (ECs). The eligibility criteria for new branch/EC licences are as under:
a) The bank should be registered under the Cooperative Societies Act of the States that have signed MoU with Reserve Bank of India or under the Multi State Co-operative Societies Act, 2002.
b) The bank should be licensed and have an elected Board of Directors with at least two professionals in it.
c) Subject to overall supervisory comfort, the bank should comply with the following mutually exclusive, performance/financial parameters:
i) CRAR should not be less than 9%
ii) Net NPAs should be below 10%
iii) There should not have been default in maintenance of CRR/SLR in the preceding financial year
iv) It should have made Net Profit in the financial year just ended
v) The Net worth should not be less than Rs.10 crore
vi) The average net worth per branch including the additional centres for which licences are sought, should not be less than Rs.2.00 crore per branch in A and B centres and Rs.1.00 crore in C and D centres (refer Annex I). For this purpose, extension counters would also be treated as branches.
3. Banks satisfying the above mentioned conditions would be eligible for additional branches/ECs not exceeding 10% of their existing branch network, over a period of two years.
4. Currently, scheduled UCBs not classified in Grade II, III, IV are allowed to open ECs without prior approval of RBI and upgrade them into branches after completion of three years. In view of the policy now put in place, all banks are required to obtain prior authorisation for opening extension counters.
UCB's can convert extension counters into branches
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