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Classification of UCBs

Discuss Classification of UCBs within the Management Of Co-operatives ( MOC ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; Classification of UCBs One of the most important requirements for the resilience of a financial system relates to its ability ...

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Abhijeet S
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Classification of UCBs - September 16th, 2010

Classification of UCBs


One of the most important requirements for the resilience of a financial system relates to its ability to identify early warning signals on the financial health of the constituent financial institutions.

Once the weakness is identified, prompt corrective action needs to be initiated to improve the conditions of the affected institutions on the one hand and on the other, immediate steps need to be initiated to contain the spread of weakness to other constituents through inter-institutional exposure and other kinds of interdependence.


Keeping these issues in view, the Reserve Bank identifies weakness among the UCBs during the statutory inspection or on annual review of bank’s financial results.


An UCB is classified as weak bank, if:


the bank does not comply with the provisions on minimum share capital set out in Section 11(1) of the B.R. Act, 1949 (AACS), i.e., if the real or exchangeable value of the paid-up share capital and reserves of the bank has fallen below Rs. 1 lakh.


Based on parameters such as capital adequacy, non-performing assets and profitability, the Committee recommended that UCBs, which are not strong, should be classified into two groups-weak and sick Pertinently, the HPC recommended that if an UCB exhibits even one of the three symptoms laid down to identify a weak bank, it should be classified as weak.

Further, if the condition of the UCB deteriorates even further in terms of either NPA or profitability along with capital adequacy, then the UCB should be classified as sick as the interests of the depositors are endangered.
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Re: Classification of UCBs
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Jitendra Mazee
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Re: Classification of UCBs - January 19th, 2018

Quote:
Originally Posted by abhishreshthaa View Post
Classification of UCBs


One of the most important requirements for the resilience of a financial system relates to its ability to identify early warning signals on the financial health of the constituent financial institutions.

Once the weakness is identified, prompt corrective action needs to be initiated to improve the conditions of the affected institutions on the one hand and on the other, immediate steps need to be initiated to contain the spread of weakness to other constituents through inter-institutional exposure and other kinds of interdependence.


Keeping these issues in view, the Reserve Bank identifies weakness among the UCBs during the statutory inspection or on annual review of bank’s financial results.


An UCB is classified as weak bank, if:


the bank does not comply with the provisions on minimum share capital set out in Section 11(1) of the B.R. Act, 1949 (AACS), i.e., if the real or exchangeable value of the paid-up share capital and reserves of the bank has fallen below Rs. 1 lakh.


Based on parameters such as capital adequacy, non-performing assets and profitability, the Committee recommended that UCBs, which are not strong, should be classified into two groups-weak and sick Pertinently, the HPC recommended that if an UCB exhibits even one of the three symptoms laid down to identify a weak bank, it should be classified as weak.

Further, if the condition of the UCB deteriorates even further in terms of either NPA or profitability along with capital adequacy, then the UCB should be classified as sick as the interests of the depositors are endangered.
Hey, thanks for your help and sharing the information on Classification of UCBs. Well, i have also a document and uploading it where you would get more information on Classification of UCBs.
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