RBI's revised norms empower cooperative banks with greater autonomy

RBI's final business authorisation norms expand operational autonomy for co-op banks while strengthening oversight, introducing a four-tier framework for the diverse UCB sector

The Reserve Bank of India on Thursday issued revised norms for cooperative banks to help them expand credit outreach, leverage technology-driven solutions, and support localised development priorities.

 

These revisions strike a balanced approach, empowering cooperative banks with enhanced operational autonomy while embedding robust safeguards, RBI said in a statement.

 

The calibrated relaxation of authorisation norms paves the way for cooperative banks to contribute to India’s economic growth, it added.

 

The banking regulator had from time to time issued instructions to these banks like urban cooperative banks (UCBs), state cooperative banks (StCBs) and district central cooperative banks (DCCBs), on topics such as the location of a bank's business, how to change its name, and other scheduling matters. 

On July 28, the RBI placed draft Master Direction (MD) on Business Authorization for Co-operative Banks (Directions), 2025 to harmonise the instructions and guidelines and consolidate them in one place. The feedback received from banks and other stakeholders has been examined and the consequent modifications have been suitably incorporated in the final directions, it added. 

Referring to UCBs, RBI said it has adopted a four-tiered regulatory framework, given the heterogeneity in the urban cooperative sector. This approach focuses on balancing the spirit of mutuality and cooperation more prevalent in banks of smaller sizes and those with limited area of operation vis-à-vis the large-sized UCBs to expand and engage in more complex business activities.

 

RBI said it was not considering any fresh proposal for new UCBs or for conversion of cooperative credit societies into UCBs.

 

UCBs are categorised into the following four tiers for regulatory purposes, with Tier-1 covering banks having deposits up to ₹100 crore. Tier-2 would comprise of UCBs with deposits of more than ₹100 crore and up to ₹1,000 crore. Tier-3 would cover urban banks with deposits of more than ₹1,000 crore and up to ₹10,000 crore, and Tier-4 would have UCBs with deposits of more than ₹10,000 crore, the RBI said.