Key Points:
- Why licensing was stopped: RBI had paused fresh UCB licences in 2004 because many newly licensed cooperative banks became financially unsound within a short period.
- What RBI proposes: RBI is considering an on-tap licensing framework, under which eligible institutions could apply for a UCB licence whenever they meet the prescribed conditions instead of waiting for a special licensing round.
- Likely eligible entities: The discussion paper favours allowing large, well-governed co-operative credit societies with a proven track record to graduate into Urban Co-operative Banks
- Proposed capital requirement: Eligible societies may need a minimum capital base of ₹300 crore, although stakeholders have requested RBI to consider a lower threshold.
- Financial conditions: Proposed eligibility conditions include around 10 years of operational history, CRAR of at least 12% and net NPA below 3%, along with a strong financial track record.
- Main objective: The move aims to promote financial inclusion, competition and expansion of cooperative banking, while ensuring that only financially strong and professionally governed institutions enter the banking system.
- Importance: If implemented, the policy would mark a major change in India's cooperative banking framework by reopening fresh UCB licensing after more than 20 years.
- In January 2026, RBI released a discussion paper seeking public comments on a new licensing framework, and by June 2026 reports indicated that the central bank was considering reopening the licensing window.
Question:
Q1. RBI stopped issuing fresh licences for Urban Co-operative Banks mainly in which year?a) 1991
b) 2000
c) 2004
d) 2014
Answer: c) RBI stopped fresh UCB licensing in 2004 after finding that a significant number of newly licensed cooperative banks had become financially weak. In 2026, RBI began considering a new, more selective licensing framework for financially sound cooperative credit societies.
