PMC Bank case fallout: RBI asks UCBs to make higher provisions

The Reserve Bank on Friday issued fresh provisioning norms for urban cooperative banks' inter-bank exposure as well as valuation of their perpetual non-cumulative preference shares and equity warrants, directing them to continue making provisions to the tune of 20 per cent for such exposures. The banking regulator came up with these rules in the wake of the bankruptcy of the corruption-ridden Punjab & Maharashtra Cooperative Bank (PMC) in September 2019 and the subsequent merger of the cooperative bank with Unity Small Finance Bank, which came into effect from January 25, 2022. Earlier, similar directions were issued after the board of the largest cooperative bank was superseded by the RBI and the subsequent circulars on these matters issued on April 20, 2020 and on January 25, 2022. "UCBs shall continue to make provisions on inter-bank exposures arising from outstanding uninsured deposits, as under the April 20, 2020 circular until the actual allotment of PNCPS (Perpetual ...

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