Provisioning on interbank exposure of Primary (Urban) Co-operative Banks (UCBs) under All Inclusive Directions

Last updated: 22 April 2020

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The Reserve Bank of India has issued new guidelines regarding the provisioning of interbank exposures for Primary (Urban) Co-operative Banks (UCBs) operating under All Inclusive Directions (AID). These directions restrict UCBs from discharging liabilities, affecting interbank deposits and discounted bills. The new rules mandate full provisioning for these exposures over five years at a 20% annual rate, with interest not to be recognised as income. Alternatively, UCBs can convert deposits into perpetual debt instruments to avoid provisioning.

Reserve Bank of India RBI/2019-20/222 DOR.(PCB).BPD.Cir.No.11/16.20.000/2019-20 April 20, 2020 The Chief Executive Officer All Primary (Urban) Co-operative Banks Madam / Dear Sir, Provisioning on interbank exposure of Primary (Urban) Co-operative Banks (UCBs) under All Inclusive Directions As you are aware, the imposition of All-inclusive Directions (AID) on an Urban Co-operative Bank (UCB),inter alia, restricts the bank from discharging its liabilities except as permitted by

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FAQ :

UCBs under All Inclusive Directions must fully provide for interbank exposures, including deposits and discounted bills, over five years at a 20% annual rate. Interest on these deposits should not be recognised as income.

AID restricts a UCB from discharging its liabilities except as permitted by the RBI. This affects the withdrawal of interbank deposits and the timely discharge of interbank exposures like discounted bills.

Yes, if UCBs convert such deposits into long-term perpetual debt instruments, which can be recognised as capital under a restructuring scheme, provisioning on the converted portion is not required.

These instructions are effective immediately from April 20, 2020.