Up to 65 weak Urban Cooperative Banks to exit turnaround regime by March

PCA will replace the existing SAF from the beginning of the new financial year - Apr 2025. During FY24, 122 UCBs across the country came out of SAF. The number of UCBs stood at 1,470 at end of Mar '25

Ahead of the new prompt corrective action (PCA) framework for Urban Cooperative Banks (UCBs), about 60-65 weak UCBs are expected to exit the current supervisory regime by March 2025 on improvement in performance.

At present, a little over 500 weak banks are under the Supervisory Action Framework (SAF) for stressed banks, according to Ajay Bramhecha, director, National Federation Of Urban Cooperative Banks And Credit Societies Limited (NAFCUB).

PCA will replace the existing SAF from the beginning of the new financial year – April 2025. During the financial year 2024 (FY24), 122 UCBs across the country came out of SAF. The number of UCBs stood at 1,470 at the end of March 2024.

Bramhecha, also chairman, Maharashtra Urban Cooperative Banks Federation, told Business Standard, that in FY25, near about 60-65 UCBs are expected to come out of SAF. This number had risen to cross the 600-mark in the aftermath of COVID pandemic. However, there has been improvement in the working of many of them in the last two years and they exited the SAF regime, helping to enhance financial stability, he said.

The capital position of UCBs has been continuously improving in the post-pandemic period. The capital adequacy of UCBs rose to 17.5 per cent in March 2024 from 16.5 per cent a year ago. This improvement (in capital) has been experienced across the tiers of UCBs, according to the Financial Stability Report (FSB) - June 2024.

Steps like amendments in banking regulations giving additional power to regulate entities, formation of board of management have helped to enhance governance and improve running of UCBs on professional lines, Bramehcha added.

Gross non-performing assets (NPAs) of UCBs stood at 8.8 per cent and net NPAs stood at 2.8 per cent in March 2024. The provision coverage ratio stood at 70.1 per cent at the end of March 2024, FSB data showed.