RBI Discussion Paper to Restart Urban Co-operative Bank Licensing
Why in the news
RBI has floated a Discussion Paper to issue new Urban Co-operative Bank licences again after a gap since 2004.
Key facts
- Licensing has been on hold since 2004.
Proposed eligibility
| Criterion | Proposal |
|---|---|
| Minimum capital | ₹300 crore, measured at 31 March of the previous financial year |
| Capital Adequacy Ratio | 12% or more |
| Net NPA | 3% or less when licence is granted |
| Active operations | At least 10 years |
| Financial record | Good for at least 5 years, with improving trends |
Rationale
- RBI observes that most earlier UCB failures were among smaller banks, so only large co-operative credit societies with long, stable records are favoured.
- Preference for multi-state co-operative credit societies; some uni-state ones if wide-footprint.
Exam angle
- Instrument: Discussion Paper, then draft norms after consultation.