RBI to issue new draft norms for urban cooperative bank licensing shortly

Mumbai, Aug 5, 2026

The proposed framework sets capital, asset quality and governance criteria for cooperative credit societies seeking to become urban cooperative banks after a two-decade pause

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said the central bank would soon issue draft guidelines on the licensing of urban cooperative banks (UCBs), incorporating feedback received on its earlier discussion paper.

In January 2026, the RBI released a discussion paper proposing a framework for licensing new UCBs, reopening a process that has remained largely dormant since 2004.

The paper laid down minimum capital, asset quality and governance criteria for eligible cooperative credit societies seeking to transition into UCBs.

Under the proposed framework, a cooperative credit society must have minimum capital of ₹300 crore as of March 31 of the preceding financial year to be eligible to apply. It should also maintain a capital adequacy ratio of at least 12 per cent and a net non-performing asset (NPA) ratio of not more than 3 per cent at the time of the grant of a licence.

The discussion paper further stated that an applicant should ideally have been operational for at least 10 years, with a sound financial track record for a minimum of five years.

Recognising the need for UCBs to compete effectively with small finance banks (SFBs), commercial banks and non-banking financial companies (NBFCs), the RBI also proposed that prospective applicants should have a wider geographical presence.

“Therefore, multi-state cooperative credit societies may be preferred entities. However, select single-state cooperative credit societies that otherwise meet the wider geographical footprint and other eligibility criteria may also be considered,” the discussion paper said. 

[The Business Standard]