The Reserve Bank of India (RBI) on Wednesday released draft guidelines for ‘on-tap’ licensing of Urban Co-operative Banks (UCBs), paving the way for fresh banking licences after more than two decades. The central bank has invited comments from stakeholders on the proposed framework till September 5, 2026.
Under the draft framework, applications for new UCB licences can be submitted on a continuous (“on-tap”) basis. However, RBI has made it clear that licences will be granted only on a very selective basis, even if applicants meet the prescribed eligibility criteria.
In the initial phase, only Multi-State Credit Cooperative Societies registered under the Multi-State Cooperative Societies Act, 2002, will be eligible to apply. Such societies must have been in existence for at least 10 years, maintain minimum deposits of Rs 10,000 crore, and possess a minimum net worth of Rs 300 crore based on audited financial statements as on March 31 of the previous financial year.
Applicants must also demonstrate a positive and progressive financial and operational track record over the previous five years. In addition, they should maintain a Capital to Risk-weighted Assets Ratio (CRAR) of at least 12% and keep Net Non-Performing Assets (NPA) below 3%.
The draft prescribes stringent governance standards. No member can hold more than 5% shareholding, while directors must satisfy RBI’s ‘fit and proper’ criteria, possess sound credentials and integrity, and should not have defaulted to any bank or financial institution. Directors will not be permitted to hold executive positions in the proposed bank.
Eligible societies will be required to submit a detailed five-year business plan covering financial projections, branch expansion, technology adoption, risk management, human resource strategy, priority sector lending, compliance with CRR/SLR norms and the separation of non-banking activities.
Applications must be submitted through RBI’s PRAVAAH portal along with a No Objection Certificate (NOC) from the Central Registrar of Cooperative Societies (CRCS), a shareholder resolution approving conversion into a bank and other prescribed documents.
Following preliminary scrutiny, RBI will conduct due diligence and inspection before the proposal is examined by an Internal Screening Committee and finally considered by the Committee of the Central Board. Any in-principle approval granted will remain valid for 18 months.
The draft further requires successful applicants to establish robust IT and cybersecurity infrastructure, implement a Core Banking Solution (CBS), comply with governance requirements, amend their bye-laws in line with RBI regulations and obtain deposit insurance from DICGC before commencing banking operations.
According to RBI, the proposal follows the discussion paper issued in January 2026 and reflects the improved financial health of the urban cooperative banking sector, while ensuring that only financially sound and well-governed cooperative societies are considered for conversion into banks.
