RBI Mulls Reopening Licences for Urban Co-operative Banks
Why in the news
RBI floated a plan to grant urban co-operative bank licences again after a gap exceeding two decades, seeking views from stakeholders.
About UCBs
- Community-based banks owned by members, active in urban and semi-urban areas.
- Customers: small borrowers, traders, salaried staff, MSMEs.
- Guided by mutual help, one-member-one-vote control and local participation.
| Period | Development |
|---|---|
| 1904 | First urban co-operative credit society registered at Kanchipuram |
| 1966 | UCBs placed under Banking Regulation Act, 1949, giving dual control: RBI for banking, States for management and incorporation |
| 1990s | Rapid licensing; weak governance |
| 2004 | RBI halted fresh licences |
| 2020 | Amendment Act strengthened RBI’s supervision |
| 2024 | NUCFDC created for technology, professional governance and resilience |
Functions
- Local deposits; credit to MSMEs, informal urban sector, small traders.
- Financial inclusion via affordable, relationship-based banking.
Exam angle
- Licensing freeze: 2004; governing law: Banking Regulation Act, 1949.