The government has clarified that there is currently no proposal under consideration to license new Urban Cooperative Banks (UCBs), even as the Reserve Bank of India (RBI) has initiated a consultative process to review the existing framework for granting fresh licences. The clarification was given by Union Minister of State for Finance Pankaj Chaudhary in a reply in Parliament.
The Minister said that Urban Cooperative Banks continue to occupy an important place in India’s banking ecosystem, particularly in catering to the financial needs of small traders, middle-class households, local entrepreneurs and self-employed individuals.
Operating on cooperative principles, UCBs have traditionally focused on community-based banking and local credit delivery, complementing the role played by commercial banks in urban and semi-urban areas.
While ruling out any immediate move to allow new UCBs, the Minister noted that the RBI has taken steps to initiate a broader review of the sector’s future regulatory approach. In this context, the central bank released a discussion paper on January 13, 2026, inviting comments and feedback from stakeholders on the licensing of new UCBs.
The consultation exercise is aimed at assessing whether the current policy framework remains suitable in light of changes in the financial system, technological advancements and evolving risk considerations.
Urban Cooperative Banks have undergone significant regulatory restructuring in recent years. Following concerns over governance standards, asset quality and operational resilience, the RBI introduced tighter supervision, enhanced capital adequacy norms and a strengthened regulatory framework for the sector.
Measures such as the introduction of a four-tier regulatory structure, mandatory technology upgrades and closer oversight have sought to improve stability while preserving the cooperative character of these institutions.
Against this backdrop, the discussion on new licensing norms is seen as part of a cautious and calibrated approach. Policymakers and regulators have emphasised the need to strike a balance between encouraging growth and innovation in the cooperative banking space and ensuring that new entrants meet robust standards of governance, financial strength and risk management. Stakeholder feedback is expected to play a key role in shaping any future policy decisions.
Providing region-specific information, the government informed Parliament that 14 Urban Cooperative Banks are currently functional in Delhi. All these banks are registered under the Delhi Cooperative Societies Act, 2003, and operate within the regulatory framework applicable to UCBs.
These institutions continue to serve local communities by mobilising deposits and extending credit, particularly to segments that may have limited access to larger banking networks.
The government reiterated that any decision on licensing new UCBs would be taken after careful examination of stakeholder views and regulatory considerations. For now, the focus remains on strengthening existing Urban Cooperative Banks, improving their governance and resilience, and ensuring that they continue to contribute effectively to financial inclusion and local economic development.
