RBI Governor Sanjay Malhotra, while announcing the August monetary policy decisions on Wednesday (August 5), said the central bank has issued draft guidelines for licensing of UCBs and will seek stakeholder feedback before finalising the norms.
The RBI had stopped issuing fresh licences for urban co-operative banks in 2004 following financial crises and governance-related irregularities in parts of the co-operative banking sector during the early 2000s.
The move came after the crisis at Madhavpura Mercantile Co-operative Bank in 2001, which raised concerns around risk management and supervision in the sector.
Since then, the number of UCBs has declined from over 2,100 to around 1,457 by 2025, as consolidation and regulatory action reshaped the sector.
The announcement comes amid renewed discussions around expanding the role of urban co-operative banks. Last week, Cooperation Ministry Secretary Ashish Kumar Bhutani, at a book release event, called for the resumption of UCB licensing and said India needs urban co-operative banks in every town.
The RBI’s draft guidelines are expected to provide a framework for new licences while focusing on governance, financial strength and regulatory compliance of UCBs.The detailed norms will be finalised after stakeholder consultations.
