RBI said that at the time of licensing, the assessed CRAR should not be less than 12% and the net NPA ratio should not exceed 3% (Photo: AP).
Mumbai: After a two decade pause on fresh licences to urban cooperative banks, RBI has decided to reopen the window and move towards issuing licences on an on tap basis following stakeholder feedback on its Jan 2026 discussion paper.“A discussion paper on Licensing of UCBs was published for stakeholder feedback on January 13, 2026 following a two decade pause on issuance of fresh licenses. On an analysis of the feedback, it has been decided to resume licensing of UCBs on ‘on tap’ basis. The draft guidelines will be issued shortly for stakeholder consultation,” said RBI governor Sanjay Malhotra in his statement on development and regulatory policies of the RBI.RBI had in Jan floated the discussion paper, stating that licensing should factor in improved regulatory powers after the 2020 amendments, while initiating consultations on resuming licences after a pause since 2004. New cooperative banks will improve access to financial services and increase competition and thereby boost lending to small business, traders, salaried and low to middle income borrowers.The central bank indicated that if licensing is resumed, it would adopt a cautious approach with stringent eligibility norms and scale up based on experience.
It said preference could be given to larger co operative credit societies to mitigate risks observed in smaller failed entities.In an earlier-issued discussion paper, RBI said that standards aligned with commercial banks would be necessary irrespective of organisational form. According to the paper, this may require statutory amendments to co operative laws to improve board composition through professional and independent directors, strengthen board functioning, and regulate shareholding including thresholds such as acquisition beyond 5%.The discussion paper proposed raising the minimum capital requirement for eligibility to apply for a UCB licence to Rs 300 crore, reflecting the need for stronger financial buffers.It also set out track record requirements for applicant entities. According to the paper, co operative credit societies should have at least 10 years of active operations and a minimum of five years of sound financial performance, with a demonstrated positive and progressive trend in operational and financial parameters in the preceding five years.On financial eligibility, RBI said that at the time of licensing, the assessed CRAR should not be less than 12% and the net NPA ratio should not exceed 3%.The paper also highlighted the importance of geographical footprint for viability and diversification. According to the document, entities with a wider presence would be better placed to access a diversified customer base and compete with peers, with multi state co operative credit societies preferred, although strong uni state entities meeting the criteria may also be considered.RBI said the decision on licensing should take into account improved regulatory oversight after the 2020 amendments, the strengthening of the sector following consolidation, and the role of the umbrella organisation in providing technology and liquidity support.