Urban Cooperative Banks

After a 20-year freeze, the RBI is preparing to issue new UCB licences as reforms, stronger oversight and improving financial health reshape the cooperative banking sector

The proposed framework sets capital, asset quality and governance criteria for cooperative credit societies seeking to become urban cooperative banks after a two-decade pause

From AI and EVs to cooperative banks and data governance, India's transformation will depend less on ambition and more on effective institutions and execution

UCBs need to combine their cooperative values with contemporary capabilities

RBI has proposed raising the unsecured loan cap for urban co-operative banks to 20 per cent of advances, revising norms on unsecured lending and housing loan tenors

RBI Governor Sanjay Malhotra urges urban co-operative banks to strengthen governance, underwriting and asset quality, reiterating their role in financial inclusion

CAR not less than 12%; net NPA not above 3%

Banking Regulation (Amendment) Act has prescribed a ceiling on the continuous tenure of directors on both state and central co-operative banks and urban co-operative banks, raising it from 8 to 10 yrs

India's urban co-operative banks fell to 1,457 at end-March 2025 from 1,926 in 2004, as RBI consolidation continued via mergers, closures and licence cancellations

Officials also said the new rules would raise compliance costs by over 20 per cent

India has over 800,000 cooperative societies, comprising around 200,000 cooperatives and 600,000 non-credit cooperatives

RBI advises UCB directors to ask tough questions to senior management to ensure ethical, transparent, and prudent operations, aiming to prevent distress in the banks

Augurs well for banks with relatively lower organic PSL generation

He said that the UCBs must maintain high standards of customer service to build and retain trust

RBI Governor Sanjay Malhotra advised the UCBs to ensure that they remain operationally resilient, including against IT and cyber-related risks

According to RBI norms, UCBs are required to have at least 50 per cent of their aggregate loans and advances consisting of small value loans by March 31, 2026

He said the government has decided to take up 54 programmes under the cooperative sector

PCA will replace the existing SAF from the beginning of the new financial year - Apr 2025. During FY24, 122 UCBs across the country came out of SAF. The number of UCBs stood at 1,470 at end of Mar '25

Shaktikanta Das stated that to provide more flexibility, avenues for UCBs to raise capital, a discussion paper on capital-raising avenues will be issued for feedback from stakeholders

Gives one time permission to transfer corpus to reserves