RBI curbs on UCBs expansion eased

The Reserve Bank of India (RBI) has eased the blanket ban it has imposed on opening of new branches by urban cooperative banks (UCBs).

After about three years, the central bank has agreed to grant branch licences to UCBs registered under the Multi State Co-operative Societies Act or are set up under the laws of states which have signed memorandum of understandings for financial restructuring of these banks.

RBI has, however, set stiff conditions. The UCBs seeking to open more branches should have at least two professionals elected on to the board.

To acquire branch licences, these banks should also have minimum capital capital adequacy ratio of 9 per cent and net non-performing assets should be below 10 per cent.

Additionally, banks would have to ensure that they have not defaulted in the maintenance of cash reserve ratio and statutory liquidity ratio in the preceding financial year and have made profit in the financial year 2006-07.

Co-operative banks with a net worth of Rs 10 crore and above will only be permitted to apply for fresh branches.

The average net worth per branch including the additional centres for which licences are sought, should be not less than Rs 2 crore per branch in A and B centres and Rs 1 crore in C and D centres, said the RBI. Extension counters would also be treated as branches.

Banks that meet the parameters laid down by RBI would be eligible for additional branches and ECs not exceeding 10 per cent of their existing branch network, over a period of two years. Grade one UCBs would have to obtain prior authorisation from RBI for opening extension counters.