What happened: RBI restarts UCB licensing and plans an RCB risk-guidance review
The Reserve Bank of India (RBI) will resume licensing of urban cooperative banks (UCBs) after a break of more than two decades. RBI Governor Sanjay Malhotra announced that UCB licensing will proceed on an “on tap” basis, and that draft guidelines will follow after stakeholder consultation.
RBI also said it will review concentration-risk management guidelines for rural cooperative banks (RCBs). RBI linked this review to Credit Monitoring Arrangement (CMA) instructions from 2008 and stated that RBI intends to rationalise the overall regulatory framework on interest rates for all regulated entities while keeping proportionality.
Background and earlier position: UCB licensing discussion and RCB concentration-risk guidance since 2008
RBI’s UCB licensing restart follows stakeholder feedback received on an earlier UCB licensing discussion paper that RBI released in January 2026.
For RCBs, concentration-risk management guidance has been governed by Credit Monitoring Arrangement (CMA) instructions from 2008. RBI’s announcement indicates an intent to revisit these concentration-risk management directions as part of an effort to rationalise interest-rate-related regulation while maintaining proportionality.
Related current affairs
- Ministry pushing RBI to open licences for more urban co-op banks: SC
- RBI notes at start of 2027-28
- RBI has a playbook for a stronger rupee
- India set to roll out common customer ID for banks, insurers
- RBI issues Reserve Bank of India (Digital Lending) Directions, 2025 with mandatory provisions on recovery, data privacy and grievance redressal
- RBI operationalises Digital Lending Apps (DLAs) directory from 01.07.2025 to help verify association with regulated entities