The Gayatri Co-operative Urban Bank Ltd., Telangana, has formally approached the Reserve Bank of India (RBI) seeking a review and rationalisation of the recently prescribed headroom capital requirement per branch under the revised branch authorisation framework for Urban Co-operative Banks (UCBs).
In a detailed representation addressed to a Director on the RBI’s Central Board, the Bank, while endorsing the intent and broader objectives of the new regulatory framework, expressed concern over the uniform headroom capital requirement of Rs 2 crore per branch, irrespective of centre category.
It pointed out that under the earlier centre-wise entry point norms, capital requirements were aligned with population size and the economic profile of centres, providing greater operational flexibility, particularly for banks expanding into smaller towns and semi-urban areas.
The Bank has proposed either a uniform reduction of the headroom capital requirement to Rs 1 crore per branch, or alternatively, a differentiated structure whereby the requirement remains Rs 2 crore for ‘A’ category centres and is reduced to Rs 1 crore for ‘B’, ‘C’ and ‘D’ category centres. It has suggested that such a revision be considered from ABP 2026–27 onwards.
Highlighting its growth trajectory, Gayatri Co-op Urban Bank stated that it was established in 2000 at Jagtial with an initial share capital of Rs 25.11 lakh contributed by 1,008 members. After operating as a single-unit bank for its first eight years, the Bank expanded steadily following the liberalisation of branch licensing in 2008.
At present, it operates 81 branches across Telangana, serves over 8.76 lakh customers, has a business size of around Rs 3,900 crore, and is registered as a Multi-State Co-operative Bank under the MSCS Act, 2002.
According to the Bank, the uniform capital norm places a disproportionate burden on Tier-2 and Tier-3 UCBs, potentially slowing branch expansion, reducing incentives to enter underserved regions, and impacting financial inclusion objectives. It argued that higher fixed capital allocation per branch could divert resources away from credit delivery, technology adoption, and outreach in semi-urban and rural markets.
Meanwhile, the Bank welcomed the RBI’s Master Direction dated December 4, 2025, which introduced the Eligibility Criteria for Business Authorisation (ECBA) framework in place of the earlier FSWM norms.
It appreciated the regulator’s efforts to streamline branch authorisation, enhance transparency, enable faster expansion through the Automatic Route for ECBA-compliant UCBs, and simplify approvals through a single Annual Business Plan under the Prior Approval Route.
The Bank expressed hope that rationalisation of the headroom capital norms would ease capital strain, facilitate responsible expansion, and strengthen the role of UCBs in inclusive grassroots banking, while remaining aligned with the prudential safeguards of the ECBA framework.
