The Reserve Bank of India (RBI) is considering restarting the issuance of new licences for urban co-operative banks (UCBs) after a hiatus of two decades. The central bank, as per a report on NDTV Profit, is likely to approve fresh licences for UCBs, a practice that was halted in 2004. Following a discussion paper released in January, seeking opinions on the matter, the RBI has received favorable responses from industry players supporting the move.
The feedback received by the RBI suggests a positive outlook on the proposal, with industry participants advocating for a reduction in the proposed minimum capital requirement of Rs 300 crore. The report also mentions that regulatory oversight and supervisory standards for urban co-operative banks have significantly improved since 2004, providing the RBI with more confidence in resuming the licensing process.
The discussion paper by the RBI highlighted potential advantages of allowing new UCBs to enter the sector, such as enhanced supervisory mechanisms, better financial inclusion, improved financial health of co-operative banks, and support from the sector’s umbrella organization in various areas. However, challenges like capital raising difficulties, governance concerns, and technological limitations were also noted.
India currently houses 1,457 urban co-operative banks with total assets worth Rs 7.38 lakh crore and deposits totaling Rs 5.84 lakh crore as of March 2025, according to the report.
