RBI to Resume Issuing Fresh Licences for Urban Cooperative Banks

The Reserve Bank of India (RBI) announced on 5 August 2026 that it will resume issuing fresh licences for Urban Cooperative Banks (UCBs) after a pause of more than two decades. The decision was announced during the August Monetary Policy Committee (MPC) meeting and is linked to draft guidelines for on-tap licensing of UCBs.

Urban Cooperative Banks

Urban Cooperative Banks are cooperative financial institutions that operate in urban and semi-urban areas in India. They accept deposits and provide loans, and they function under the regulatory framework of the RBI and the Banking Regulation Act, 1949.

Licensing Framework for UCBs

The RBI released draft guidelines for on-tap licensing after a discussion paper dated 13 January 2026. Credit cooperative societies applying for a licence must have at least 10 years of operation, minimum deposits of ₹10,000 crore, and a net worth of at least ₹300 crore as of 31 March of the previous financial year. Applicants must maintain a Capital to Risk-weighted Assets Ratio (CRAR) of at least 12% and a Net Non-Performing Assets (NPA) ratio below 3%. The RBI will initially give priority to multi-state cooperative societies with operations across several states.

Regulatory Background

The RBI had stopped issuing fresh licences for UCBs in 2004. The pause followed financial instability, governance issues, and failures in the sector. The Banking Regulation (Amendment) Act, 2020 expanded the RBI’s regulatory powers over cooperative banks.

Important Facts for Exams

• The RBI is the central bank of India and was established in 1935 under the Reserve Bank of India Act, 1934.
• Urban Cooperative Banks are part of the cooperative banking structure in India.
• CRAR is a key prudential norm used to measure a bank’s capital adequacy.
• Net NPA is calculated after deducting provisions from gross NPAs in banking supervision.

Exam-Relevant Context

The RBI’s on-tap licensing model allows eligible applicants to seek licences during the period when the window remains open. The UCB sector is supervised under banking regulation norms and cooperative sector provisions in India.