RBI issues revised norms to categorize UCBs as FSWM banks

As a step to improve the profile of UCBs Reserve Bank of India, revised norms were issued by the new norms to categorize UCBs as Financially Sound and Well Managed FSWM banking entities. These norms are in effect with immediate effect.

For categorising themselves as FSWM category banks, the capital adequacy ratio should be at least one per cent above the minimum CRAR applicable to an UCB as on the reference date. Net non-performing assets NPAs should not be more than three per cent.

They should have reported net profit for at least three out of the previous four years. They should not have incurred a net loss in the past year, he said.

The bank should not have defaulted on maintaining the Cash Reserve Ratio CRR and Statutory Liquidity Ratio SLR during the previous year, according to the banking regulators.

The bank should have a sound internal control system with at least two professional directors on the board and fully implemented core banking solution CBS. No monetary penalties should have been imposed on the bank for violating RBI's directives and guidelines during the last two financial years.

The eligibility to be classified as FSWM can be determined by the revised criteria based on the financials and findings of the inspection report or audited financial statements, whichever is the latest.

The boards of the FWSM have to examine compliance with the FWSM criteria and pass necessary resolutions and inform immediately. It should not be later than within 15 calendar days of the resolution's date.

UCBs can review compliance with FSWM criteria at the Board level immediately after the audit of the financial statements and RBI inspection report as and when they receive. The process will be subject to a supervisory review, according to RBI.