The Reserve Bank of India today issued a Prompt Corrective Action (PCA) Framework for Primary (Urban) Co-operative Banks (UCBs). The provisions of the PCA Framework will be effective from April 1, 2025.

Background

The Reserve Bank had issued a Supervisory Action Framework (SAF) as an early intervention tool for bringing about desired improvements in weak UCBs and UCBs which are experiencing financial stress. The SAF was last revised vide RBI Circular dated January 6, 2020¹. This PCA framework shall replace the SAF.

The salient features of the PCA Framework are as follows:

• The framework has been suitably harmonised with similar frameworks applicable for Scheduled Commercial Banks and Non-Banking Financial Companies, with suitable modifications keeping in mind the underlying principle of proportionality.

• The PCA framework is largely principle-based with fewer number of parameters as compared to the SAF, without any dilution in the supervisory rigour.

• The revised framework seeks to provide flexibility to design entity specific supervisory action plans based on the assessment of risks on a case-by-case basis.

• The hard-coded limit of Rs 25,000/- for restrictions on capital expenditure by UCBs under SAF has been dispensed with.  The revised framework enables the Supervisors to decide the limit depending upon their assessment of each entity.

• The PCA Framework has been made applicable to all² UCBs in Tier 2, Tier 3 and Tier 4, except UCBs under All Inclusive Directions (AID).

• Tier 1 UCBs have been excluded from the PCA framework for the present. However, they shall continue to be subjected to enhanced monitoring under the extant supervisory framework.

• The revised framework is expected to give more focus on the larger UCBs requiring more intensive monitoring by optimal utilisation of supervisory resources.

(Puneet Pancholy)  
Chief General Manager

Press Release: 2024-2025/778

¹ Supervisory Action Framework for Primary (Urban) Co-operative Bank (UCBs)

² The UCBs have been categorized into following four tiers for regulatory purposes:

Tier 1 - All unit UCBs and salary earners’ UCBs (irrespective of deposit size), and all other UCBs having deposits up to ₹100 crore;

Tier 2 - UCBs with deposits more than ₹100 crore and up to ₹1,000 crore;

Tier 3 - UCBs with deposits more than ₹1,000 crore and up to ₹10,000 crore;

Tier 4 - UCBs with deposits more than ₹10,000 crore.