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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Reserve Bank of India (Urban Co-operative Banks - Prudential Norms on Capital Adequacy) Directions, 2025

28-Nov-2025 | RBI/DOR/2025-26/275 DOR.CAP.REC.194/09-18-201/2025-26

RBI has issued RBI (Urban Co-operative Banks - Prudential Norms on Capital Adequacy) Directions, 2025 effective from 28th November 2025. Key Highlights: 1. Applicability - All Urban Co-operative Banks (UCBs) defined under the Banking Regulation Act. 2. Minimum Capital Requirement - All UCBs must maintain a minimum Capital to Risk-Weighted Assets Ratio (CRAR) as prescribed by RBI to ensure financial strength and stability. 3. Capital Components - Regulatory capital consists mainly of Tier I and Tier II capital. Tier I must form the bulk of capital and represents the bank's core financial strength. 4. Risk-Weighted Assets (RWA) - UCBs must calculate RWAs for credit risk, market risk, and operational risk. Capital requirements are then computed on these RWAs. 5. Market and Operational Risk Capital Charge - Banks must provide additional capital for risks arising from investments, interest rate movements, and price fluctuations. They must hold capital to cover losses arising from internal processes, systems failures, frauds, and errors. 6. Capital Adequacy Reporting - Banks must compute and report capital adequacy at prescribed intervals, following the format and methodology specified by RBI. 7. Restrictions for Non-Compliance - If a UCB fails to maintain the required CRAR, RBI may impose supervisory restrictions, including limits on branch expansion, credit growth, dividends, or other activities. For more information, please refer to the attached document.

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