Urban Co-operative Banks Prudential Norms on Capital Adequacy

RBI/DOR/2025-26/275 DOR.CAP.REC.194/09-18-201/2025-26 November 28, 2025

Previous Versions

Reserve Bank of India (Urban Co-operative Banks - Prudential Norms on Capital Adequacy) Directions, 2025 (Updated as on June 16, 2026)

Table of Contents

• Chapter I Preliminary
  • A Short Title and Commencement
  • B Applicability
  • C Definitions
• Chapter II Regulatory capital
  • A Net worth
  • B Statutory requirements
  • C Minimum regulatory capital
  • D Composition of capital
  • E Tier 1 capital
  • F Tier 2 Capital
• Chapter III Computation of risk weighted asset (RWA)
  • A Capital charge for credit risk
  • B Capital charge for market risk
• Chapter IV Other instructions
  • A Share linking to Borrowings
  • B Refund of share capital
  • C Protection of investors in regulatory capital instruments
  • D Reporting
• Chapter V Repeal and Other Provisions
  • A Repeal and Savings
  • B Application of other laws not barred
  • C Interpretations
• Annex I Statement of Capital, RWAs and CRAR
• Annex II Reporting format for the purpose of monitoring the capital ratio

In exercise of powers conferred by Section 35A read with Section 56 of the Banking Regulation Act (BR Act), 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest and in the interest of banking policy so to do, hereby, issues the Directions hereinafter specified.

Chapter I

Preliminary

A Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Urban Co-operative Banks - Prudential Norms on Capital Adequacy) Directions, 2025.

2. These Directions shall come into effect immediately upon issuance.

B Applicability

3. These Directions shall be applicable to Urban Co-operative Banks (hereinafter collectively referred to as 'banks' or ‘UCBs’ and individually as a 'bank' or ‘UCB’).

For the purpose of these Directions, Urban Co-operative Banks shall mean Primary Co-operative Banks as defined under section 5(ccv) read with Section 56 of Banking Regulation Act, 1949.

C Definitions

4. In these Directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below:

(1) ‘Credit Risk’ is defined as the potential that a bank's borrower or counterparty may fail to meet its obligations in accordance with agreed terms. It is also the possibility of losses associated with diminution in the credit quality of borrowers or counterparties;

(2) ‘Deferred Tax Assets (DTA)’ and ‘Deferred Tax Liabilities (DTL)’ shall have the same meaning as assigned under the applicable Accounting Standards;

(3) ‘Derivative’ shall have the same meaning as assigned to it in section 45U(a) of the RBI Act, 1934;

(4) ‘Market Risk’ is defined as the risk of losses in on-balance sheet and off- balance sheet positions arising from movements in market prices;

(5) ‘Other approved securities’ shall have the same meaning as defined under ‘Reserve Bank of India (Urban Co-operative Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025’;

(6) ‘Public Financial Institution’ shall have the same meaning as defined under sub-section 2(72) of the Companies Act, 2013; and

(7) ‘Subordinated’ refers to the status of the debt. In the event of the bankruptcy or liquidation of the debtor, subordinated debt only has a secondary claim on repayments, after depositors and other debt has been repaid.

5. All other expressions, unless defined herein, shall have the same meaning as have been assigned to them under the BR Act, 1949 or the RBI Act, 1934 or respective State Co-operative Societies Act and rules / regulations made thereunder, or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be.

Chapter II

Regulatory capital

A Net worth

6. A UCB shall have minimum net worth as under:

(i) A Tier 1 UCB operating in a single district shall have minimum net worth of ₹2 crore;

(ii) All other UCBs (of all tiers) shall have minimum net worth of ₹5 crore;

(iii) A UCB which currently does not meet the minimum net worth requirement as above, shall achieve the minimum net worth of ₹2 crore or ₹5 crore (as applicable) in a phased manner. Such a UCB shall achieve at least 50 per cent of the applicable minimum net worth on or before March 31, 2026 and the entire stipulated minimum net worth on or before March 31, 2028.

Explanation -

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

(b) Tier 2 – A UCB with deposits more than ₹100 crore and up to ₹1000 crore;

(c) Tier 3 – A UCB with deposits more than ₹1000 crore and up to ₹10,000 crore; and

(d) Tier 4 – A UCB with deposits more than ₹10,000 crore.

7. The computation of ‘net worth’ in this context shall be as per the table given below.

Note -

(1) Funds raised through Perpetual Debt Instruments (PDIs) included in Tier 1 capital and debt capital instruments included in Tier 2 capital shall not be reckoned as part of net worth.

(2) Perpetual Cumulative Preference Shares (PCPS), Redeemable Non-Cumulative Preference Shares (RNCPS) and Redeemable Cumulative Preference Shares (RCPS) included in Tier 2 capital shall not be reckoned as part of net worth.

(3) No general or specific provisions shall be included in computation of net worth.

B Statutory requirements

8. In terms of the provisions contained in section 11 read with section 56 of the BR Act, 1949, no co-operative bank shall commence or carry on banking business unless the aggregate value of its paid-up capital and reserves is not less than one lakh of rupees. In addition, under section 22(3)(d) of the above Act, the Reserve Bank prescribes the minimum entry point capital (entry point norms) from time to time, for setting-up of a new UCB.