RBI likely to reopen licensing window for urban co-operative banks: Report
New Delhi, June 11
The Reserve Bank of India is likely to revive the issuance of fresh licences for urban co-operative banks, a move that would end a two-decade pause on new entrants in the sector, according to a report.
According to a report in NDTV Profit -- citing sources -- the central bank is expected to approve fresh licences for UCBs, a practice it had discontinued in 2004.
The development comes after the RBI released a discussion paper in January seeking feedback on whether it should resume granting licences to urban co-operative banks.
The RBI has received positive responses to the proposal, with industry participants supporting the move while also suggesting that the proposed minimum capital requirement of Rs 300 crore be reduced, the report said.
It further noted that regulatory oversight and supervisory standards for urban co-operative banks have improved significantly since 2004, giving the central bank greater comfort in considering the resumption of licensing.
In its discussion paper, the RBI outlined several potential benefits of allowing new UCBs to enter the sector.
These included stronger supervisory mechanisms, enhanced financial inclusion, improved financial health of co-operative banks and support from the umbrella organisation for the sector in areas such as capital, technology and knowledge-sharing.
Meanwhile, the paper highlighted a number of challenges, including difficulties in raising capital, limited incentives for investors due to the face-value entry and exit framework for shareholders, governance concerns, technological limitations and the relatively small contribution of UCBs to the overall banking system.
As of March 2025, India had 1,457 urban co-operative banks with total assets of Rs 7.38 lakh crore and deposits amounting to Rs 5.84 lakh crore, according to data cited in the report.
— IANS
Reader Comments
About time! 🎉 My local UCB gave me my first education loan when no other bank would. These banks understand local needs better. But hope RBI doesn't relax rules too much - we saw what happened with PMC Bank!
Interesting development. As someone who works in banking, UCBs do play a crucial role in financial inclusion. But I hope RBI maintains strict oversight - the 2004 pause happened for good reasons.
Rs 300 crore is too little actually for a bank. We need well-capitalized UCBs that can invest in technology. So many small UCBs still don't have proper digital banking! 📱
Good news for small entrepreneurs! UCBs are more approachable than big banks. But why wait 20 years? Government should have reformed the sector earlier instead of just banning new licences.
Finally some positive banking reform! But I'm skeptical - will this actually help the common man or just benefit existing cooperative bank directors? Need transparent selection process. 🤔
Good move! My mother manages a small UCB in our town and they do more for local farmers than any nationalized bank. Just hope new UCBs don't get into reckless lending like some did in
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