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Transformation of UCBs into Universal Banks

Big Urban Co-operative Banks (UCBs) might think about transforming into all-inclusive banks. Huge metropolitan co-usable banks (UCBs), for example, Saraswat Co-employable Bank and SVC Co-usable Bank might really investigate their co-usable construction in the background of the lofty need area loaning (PSL) target recommended by the Reserve Bank of India (RBI).

UCBs need to expand their PSL portfolio – containing advances to horticulture, miniature, little and medium ventures, trade credit, instruction, lodging, social foundation, among others – so it represents 75% of their advances by March 2024.

Along these lines, to adjust their general credit piece to the reconsidered PSL standards, enormous UCBs may either cut/quit developing their discount loaning portfolio or purchase need area loaning declarations (PSLCs) or do both even as they all while developing PSL portfolio under their own stream according to a co-operative banking expert.


As the PSL target is steep, the bigger ones among the UCBs might consider changing over into universal banks as and when RBI opens up this course. At March-end 2020, there were 88 UCBs with deposits greater than or equal to ₹1,000 crore and 50 UCBs with advances greater than or equal to ₹1,000 crore, per RBI data. Currently, though RBI allows UCBs to convert into small finance banks (SFBs) under the Scheme of Voluntary Transition, large UCBs do not see any advantage in doing. PSL and minimum capital adequacy ratio (CAR) for SFBs are both high at 75 per cent (of advances) and 15 per cent (of their risk-weighted assets/RWA), respectively. While PSL target for UCBs will get aligned with that for SFBs by March 2024, they are required to maintain a lower minimum CAR of 9 per cent (under Basel I norms) of their RWA.

UCBs have to reach the PSL target in phases — 45 per cent by March 2021 (from 40 per cent as of March-end 2020), 50 per cent by March 2022, 60 per cent by March 2023 and 75 per cent by March 2024.

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