Reserve Bank of India (RBI) Issues Guidelines for Urban Co-operative Banks (UCBs) Licensing and Classification

Key facts

• The Reserve Bank of India (RBI) has issued the Urban Co-operative Banks – Licensing, Scheduling and Regulatory Classification Guidelines, 2025.
• The RBI stated that no fresh proposals for the organization of new UCBs or the conversion of cooperative credit societies into UCBs are being considered.
• A four-tiered regulatory framework has been adopted for UCBs based on deposit size as of March 31 of the preceding financial year.
• Tier 1 UCBs include all unit UCBs, salary earners’ UCBs, and other UCBs with deposits up to ₹100 crore.
• Tier 2 UCBs are defined as those with deposits of more than ₹100 crore and up to ₹1000 crore.
• Tier 3 UCBs consist of those with deposits of more than ₹1000 crore and up to ₹10,000 crore.
• Tier 4 UCBs include those with deposits exceeding ₹10,000 crore.
• UCBs transitioning to a higher Tier are allowed a glide path of up to two years to comply with higher regulatory requirements.
• To be included in the Second Schedule to the RBI Act, 1934, a UCB must maintain Tier 3 deposit levels for two consecutive years.
• UCBs seeking scheduling must maintain a Capital to Risk-Weighted Assets Ratio (CRAR) of at least three per cent more than the minimum requirement.
• The eligibility for scheduling also requires the absence of major regulatory and supervisory concerns based on the latest RBI inspection or audited financials.