RBI On-Tap Licensing for Urban Cooperative Banks Resumes
Why in the news
Along with the August 2026 policy announcement, Governor Sanjay Malhotra said RBI would reopen UCB licences after more than twenty years and soon release draft guidelines for public comment. A review of lending-concentration norms for rural cooperative banks was announced too.
Key facts
- On-tap licensing means applications can be filed at any time, not only in set rounds; RBI already uses this for universal and small finance banks.
- A discussion paper on UCB licensing came out on 13 January 2026; the decision follows the feedback.
- 1,457 urban cooperative banks exist, as per RBI and NABARD.
- Fresh licensing has been halted since 2004 following governance lapses and failures.
- Multi-state societies get first consideration; some wider-footprint uni-state societies may follow.
| Indicative criterion | Level proposed |
|---|---|
| Deposit base | At least ₹10,000 crore |
| Net worth | At least ₹300 crore |
| Age of society | 10 years or more |
| CRAR | 12% or above |
| Net NPA | 3% or lower |
| Registered under | Multi-State Co-operative Societies Act, 2002 |
- No member can hold over 5% of share capital, and directors cannot hold executive posts.
Concentration risk review for RCBs
- Current limits come from the 2008 CMA (Credit Monitoring Arrangement) instructions.
- The sector has grown and changed a lot in 18 years, so prudential limits need fresh thought.
- Draft amendment directions will be issued for wider consultation.
Background: cooperative bank structure
- UCBs: single-state and multi-state, serving urban and semi-urban areas.
- Short-term rural chain: State Cooperative Banks at the top, then District Central Cooperative Banks, then PACS.
- Long-term rural tier: the State and Primary cooperative agriculture and rural development banks.
- Dual control: RBI regulates banking business (Banking Regulation Act, 1949), while incorporation, management and audit lie with the State Registrar of Cooperative Societies or, for multi-state banks, the Central Registrar.
- The Banking Regulation (Amendment) Act, 2020 widened RBI’s powers after the PMC Bank crisis; DICGC cover is ₹5 lakh per depositor per bank.
- NABARD supervises State and District Central Cooperative Banks.
Exam angle
- Number of UCBs: 1,457; licensing paused since 2004.
- Portal for applications: PRAVAAH; in-principle approval valid for 18 months.
- Concentration-risk norms for RCBs: CMA instructions, 2008.
- Relevant for NABARD Grade A and RBI Grade B.