RBI to resume licensing of Urban Cooperative Banks

The Reserve Bank of India (RBI) is set to resume licensing of urban cooperative banks (UCBs), after a pause of more than two decades, as part of developing a vibrant co-operative sector.

“It has been decided to resume licensing of UCBs on ‘on tap’ basis,” RBI Governor Sanjay Malhotra announced as one of the additional measures. The draft guidelines would be issued shortly for stakeholder consultation, he added.

A discussion paper on Licensing of UCBs was published for stakeholder feedback on January 13, 2026 and the decision has been taken based on the feedback from stakeholders.

As per RBI and NABARD, there are 1,457 urban cooperative banks.

The RBI has also decided to review the guidelines on concentration risk management of rural co-operative banks (RCBs).

Highlighting that the banking sector in general, and co-operative banking sector in particular, have undergone significant expansion and changes over 18 years, it said there was a need to review prudential norms on concentration risk management of RCBs.

These are governed by the Credit Monitoring Arrangement (CMA) instructions which were issued in 2008. 

The objective is to develop a vibrant co-operative sector while addressing the prudential concerns arising from concentrated lending, according to the Governor. A draft amendment directions in this regard would be issued for wider stakeholder consultations.

RBI to review guidelines on interest rates on advances

The RBI has proposed to rationalise the regulatory framework on interest rates for all regulated entities (REs) on an in-principle basis.

The proposed rationalisation is aimed to harmonise the guidelines across REs while maintaining proportionality; address certain operational aspects of the current framework on MCLR (Marginal Cost of Fund Based Lending Rate) and EBLR (External Benchmark Lending Rate); and standardise certain divergent market practices concerning interest charging, including day count convention and benchmark reset dates, the Governor said.

“These measures seek to ensure uniformity, enhance transparency in loan pricing, strengthen monetary transmission and bolster consumer protection,” he added.

The RBI would soon issue draft directions incorporating these proposals for public comments.