RBI to issue draft guidelines for on-tap licensing of urban cooperative banks soon

The Reserve Bank of India (RBI) will soon issue draft guidelines for on-tap licensing of urban cooperative banks (UCBs), Governor Sanjay Malhotra announced on Wednesday. The draft norms, which will be released for stakeholder consultation, are the next step after the RBI issued a discussion paper on the proposal in January this year.

"The draft guidelines will be issued shortly for stakeholder consultation," Malhotra said in the Statement on Developmental and Regulatory Policies, released alongside the RBI's third bi-monthly monetary policy for FY27.

The RBI had earlier proposed ending the more than two-decade-long pause on granting fresh licences to urban cooperative banks by introducing an on-tap licensing framework, similar to that followed for universal banks.

The move is aimed at facilitating the entry of new urban cooperative banks while strengthening the regulatory framework for the sector.

The central bank had stopped issuing fresh UCB licences over concerns relating to governance standards, particularly at banks controlled or influenced by political interests, which had contributed to periodic stress in the sector.

RBI to review concentration risk norms for rural cooperative banks

Separately, the RBI also announced a review of the Credit Monitoring Arrangement (CMA) guidelines governing concentration risk management for rural cooperative banks.

Malhotra said the existing instructions, issued in 2008, need to be updated in view of the significant expansion and transformation of the cooperative banking sector over the past 18 years. "As the banking sector in general, and the co-operative banking sector in particular, have undergone significant expansion and changes since then, it has been decided to review these instructions, keeping in view the objective of developing a vibrant co-operative sector," he said.

The RBI will issue draft amendment directions for public consultation, incorporating prudential safeguards to address risks arising from concentrated lending.

The announcements came alongside the RBI's monetary policy decision, under which the Monetary Policy Committee (MPC) unanimously kept the benchmark repo rate unchanged at 5.25%, maintaining its neutral policy stance. The Standing Deposit Facility (SDF) rate was retained at 5.0% while the Marginal Standing Facility (MSF) rate and the Bank Rate remained unchanged at 5.50%. The next bi-monthly MPC meeting is scheduled for October 5-7, 2026.