The Reserve Bank of India has signalled a shift in policy on urban co-operative banks, indicating plans to resume issuing new licenses after more than two decades. The RBI had stopped granting licenses in 2001 following a series of failures in the sector that eroded confidence among depositors and regulators.
The proposed framework comes with stringent guardrails. New applicants would need to demonstrate financial strength and governance capabilities, with the RBI suggesting a minimum capital requirement of ₹300 crore for established, well-governed societies seeking to convert or launch as banks.
This move acknowledges that the urban co-op sector has matured since the early 2000s. Prospective operators would face enhanced regulatory scrutiny and compliance standards, addressing the operational and management weaknesses that triggered the 2001 freeze.
The RBI's proposal is still under consultation and has not yet been formalized into final regulation. The central bank is seeking feedback on the framework from stakeholders, including existing co-operative societies, state governments, and the financial services industry.
