RBI plans new eligibility norms for urban co-op bank licences – News Air Insight

Mumbai: An internal working group of the central bank has suggested new eligibility parameters for granting urban cooperative banking (UCB) licences. Credit cooperative societies with a minimum capital of ₹300 crore, capital adequacy ratio above 12%, net non-performing loans below 3% and sound track records for five years would qualify.

The proposal, outlined in a Reserve Bank of India (RBI) discussion paper published on Monday, marks the first step toward reopening UCB licensing after a pause of more than two decades.

The RBI said the move aims to strengthen governance and financial resilience in the sector, which has historically faced challenges such as weak capital structures, governance lapses, and technology gaps.

The paper argues that only large, well-managed cooperative credit societies be considered for conversion into UCBs. These entities must demonstrate at least 10 years of active operations and a progressive financial performance over the immediately preceding five years.

The RBI also emphasised that governance standards for UCBs mirror those for commercial banks, requiring professional and independent boards.

Statutory amendments to State and Multi-State Cooperative Acts may be necessary to enforce these norms. As on March 31, 2025, the number of UCBs totalled 1,457.

At present, there are 82 weak UCBs under supervisory restrictions; while 28 very weak UCBs have been placed under the All-Inclusive Directions, 32 UCBs are under Prompt Corrective Action and 22 UCBs are under Supervisory Action Framework.