A Reserve Bank constituited panel suggested a "tiered regulatory" framework on Urban Co-operative Banks (UCBs) to strengthen the sector.
In its report, the Expert Committee on Primary (Urban) Co-operative Banks, under the chairmanship former RBI Deputy Governor N.S. Vishwanathan, said: "The Committee observed that given the heterogeneity in the sector, a tiered regulatory framework with more than two tiers is required to balance the spirit of mutuality and co-operation more prevalent in banks of smaller sizes and those with limited area of operation vis-a-vis the growth ambitions of the large-sized UCBs to spread their area of operation and undertake more complex business activities on par with commercial banks."
"The Committee agreed that the deposit size can continue to be the basis for categorising banks into regulatory tiers, as for a normally functioning bank, deposit size can broadly serve as proxy for capital size and net worth."
Further, the report pointed out that additional tiers could be created to cater to the aspirations of the larger UCBs to undertake business akin to that of SFBs (Small Finance Banks) and UNBs.
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