60-65 weak UCBs to exit supervisory regime by March 2025 on performance | Banking
Ahead of the new prompt corrective action (PCA) framework for urban cooperative banks, 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 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 the current financial year (FY25), around 60-65 are expected to come out of SAF. This number had risen to cross the 600 mark in the aftermath of the 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.
Reflecting an enhanced financial profile, 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 – June 2024.
Steps like amendments in banking regulations giving additional power to regulate entities and the formation of boards of management have helped to enhance governance and improve the running of UCBs on professional lines, Bramhecha 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.
First Published: Oct 14 2024 | 6:01 PM IST
