RBI proposes to resume licensing of Urban Co-operative Banks ‘on tap’: draft asks for ₹10,000 crore deposits and ₹300 crore net worth from credit societies
RBI published draft guidelines on 5 August 2026 for licensing Urban Co-operative Banks on an ‘on tap’ basis. As proposed, only credit co-operative societies that are at least 10 years old, registered under the Multi-State Co-operative Societies Act, 2002, with deposits of at least ₹10,000 crore and net worth of at least ₹300 crore could apply. Comments were invited till 5 September 2026; that window has closed.
Key facts
- In force
- Draft only; comments were invited till 5 September 2026 (window closed)
- Who it affects
- Multi-state credit co-operative societies, their boards, members and statutory auditors; the urban co-operative banking sector
- What it is
- Comments invited
- Section
- FEMA & RBI
- Published
- 5 August 2026
In 30 seconds
- The draft follows a discussion paper on licensing of UCBs published on 13 January 2026; fresh licences had been on hold since a decision of June 2004.
- Proposed eligibility: a credit co-operative society in existence for at least 10 years, registered under the Multi-State Co-operative Societies Act, 2002 at the time of application.
- Proposed size: deposits of at least ₹10,000 crore and net worth of at least ₹300 crore, on audited financials as on 31 March of the previous financial year.
- Proposed track record: CRAR not below 12% and net NPA not above 3%, with a positive and progressive trend over the previous five years.
- An in-principle approval would be valid for 18 months; after the licence, banking business must start within six months.
- These are draft guidelines. The comment period ended on 5 September 2026 and the source documents do not contain final guidelines.
हिंदी में सार
RBI ने 5 अगस्त 2026 को Urban Co-operative Banks की ‘on tap’ लाइसेंसिंग के लिए draft guidelines जारी कीं। प्रस्ताव के अनुसार कम से कम 10 साल पुरानी, Multi-State Co-operative Societies Act, 2002 में पंजीकृत क्रेडिट सोसाइटी ही आवेदन कर सकेगी — जमा कम से कम ₹10,000 करोड़, नेट वर्थ ₹300 करोड़, CRAR 12% से कम नहीं और नेट NPA 3% से ज़्यादा नहीं। यह अभी सिर्फ़ प्रस्ताव है; सुझाव देने की आख़िरी तारीख़ 5 सितंबर 2026 थी, जो निकल चुकी है।
Before and now
In June 2004 it was decided to consider fresh licences only after a comprehensive policy for the UCB sector was in place.
Proposed (draft): eligible credit co-operative societies may apply at any time, on an ‘on tap’ basis, through the PRAVAAH portal.
What RBI has proposed
On 5 August 2026 the Reserve Bank of India published Draft Guidelines for ‘on tap’ Licensing of Urban Co-operative Banks for stakeholder consultation. The draft’s preamble recalls that in June 2004, in light of the deteriorating financial health of the sector, it was decided to consider fresh licences only after a comprehensive policy on UCBs was in place. It says the financial health of UCBs has since improved generally, and that RBI’s regulatory and supervisory powers were strengthened by the Banking Regulation (Amendment) Act, 2020.
A discussion paper was published on 13 January 2026. After examining the comments, RBI decided to issue a new framework. What follows is the draft — a proposal, not a final rule.
Who could apply
| Condition | What the draft proposes |
|---|---|
| Applicant | A Credit Co-operative Society in existence for at least 10 years |
| Registration | Under the Multi-State Co-operative Societies Act, 2002 at the time of application; in the initial phase, societies showing geographical diversification across multiple states will be considered |
| Deposits | At least ₹10,000 crore |
| Net worth | At least ₹300 crore (audited financials as on 31 March of the previous financial year) |
| CRAR | Not less than 12% |
| Net NPA ratio | Not more than 3% |
| Track record | A positive and progressive trend in operating and financial parameters in the previous five years; financials certified by the statutory auditor |
| Shareholding | No member to hold more than 5% |
| Board | RBI to assess ‘fit and proper’ status; no director to discharge an executive role |
The applicant would also submit a business plan with a project report, including five-year financial projections and a plan to separate and transfer all non-banking activities. If a bank deviates from the plan after licensing, the draft says RBI may restrict its expansion, change the management or impose other measures.
How an application would move
- Application in Form IIIA (Rule 6 of the Banking Regulation (Co-operative Societies) Rules, 1966), with an NOC from the Central Registrar of Co-operative Societies and a shareholder resolution, submitted through the PRAVAAH portal.
- The resolution to convert must be passed by a majority representing two-thirds of the shareholders, in number and value, present in person. Notice of the meeting is to be published once a week for three consecutive weeks in at least two newspapers.
- RBI screens the application, carries out due diligence on directors and inspects the society.
- An Internal Screening Committee of two Deputy Governors and two Executive Directors evaluates it; the Committee of the Central Board takes the final decision on in-principle approval.
- A rejected applicant cannot apply again for three years. An appeal lies to the Central Board of Directors within one month of receiving RBI’s communication.
The draft adds that RBI will be cautious: licences would be issued on a very selective basis, and it may not be feasible to license every applicant that meets the criteria.
After in-principle approval
The approval would be valid for 18 months and lapse automatically after that. In this period the society must put in place IT and cybersecurity infrastructure, implement CBS in full, meet governance conditions and amend its byelaws — among other things, to prohibit admission of any other co-operative society as a member and to bar a director from sitting on the Board of any other bank or credit society. Once RBI verifies compliance, the licence is issued and banking business must begin within six months.
What societies should do
The comment window closed on 5 September 2026. Societies that may qualify can measure themselves against the proposed thresholds, but should wait for the final guidelines before acting; the draft’s numbers may change.
Questions and answers
Has RBI started issuing new Urban Co-operative Bank licences?
Not on the basis of these documents. RBI has decided to resume licensing on an ‘on tap’ basis and published draft guidelines on 5 August 2026 for comments. The comment period ended on 5 September 2026; the documents do not contain final guidelines.
Who would be eligible under the draft?
A Credit Co-operative Society in existence for at least 10 years, registered under the Multi-State Co-operative Societies Act, 2002, with deposits of at least ₹10,000 crore, net worth of at least ₹300 crore, CRAR of not less than 12% and net NPA of not more than 3%.
How would a society apply?
In Form IIIA under Rule 6 of the Banking Regulation (Co-operative Societies) Rules, 1966, with an NOC from the Central Registrar of Co-operative Societies and a shareholder resolution passed by a two-thirds majority in number and value, through RBI’s PRAVAAH portal.
Does meeting the criteria guarantee a licence?
No. The draft says licences will be issued on a very selective basis and that it may not be feasible for RBI to issue licences to all applicants meeting the eligibility criteria.
What happens if an application is rejected?
Under the draft, the applicant cannot apply for a banking licence for three years from the date of the decision. An appeal can be made to the Central Board of Directors within one month of receiving RBI’s communication.
Published 5 August 2026. Updated 9 October 2026. This report is for general information and is not professional advice. Read the source document before acting on it.