RBI proposes new regime for co-op bank branch expansion, ATM setup

New ECBA framework to replace FSWM norms; banks must meet capital, profit, and compliance standards for authorisation

As part of regulatory reforms, the Reserve Bank of India (RBI) has proposed a new regime — the Eligibility Criteria for Business Authorisation (ECBA) — for granting permissions and approvals to urban co-operative banks (UCBs) to open new branches, set up ATMs, processing centres, and other infrastructure. This will replace the current Financially Sound and Well Managed (FSWM) framework.

 

A bank will be considered fully compliant with ECBA if it meets specified conditions related to capital adequacy, asset quality, profitability, reserve ratios, and more, based on the audited financial statements as of 31 March of the immediately preceding financial year, the RBI said in its draft Master Direction.

   

The regulator said banks must maintain the regulatory minimum applicable capital adequacy ratio (CAR). Their net non-performing assets (NPAs) should not exceed three per cent. Additionally, the bank must have reported net profit for the preceding two financial years without any accumulated losses on the balance sheet. 

 

There should be no default in the maintenance of the cash reserve ratio (CRR) or statutory liquidity ratio (SLR) during the current or preceding financial year. Banks must have fully implemented Core Banking Solutions (CBS). The bank must not be under any directions from the RBI, or subject to the Supervisory Action Framework or Prompt Corrective Action (PCA) in the previous or current financial year. It should also have at least two professional directors on its board.

 

A bank shall determine its compliance with the ECBA every year based on the audited financial statements for the immediately preceding financial year. The board of the bank must satisfy itself regarding compliance and pass a resolution approving the same. The RBI should be notified within 15 calendar days from the date of the board resolution.

 

The period of validity for ECBA compliance will be considered valid up to 30 September of the next financial year.