RBI cancelled license of Few Urban Co-operative Banks (UCBs) for not complying with BR Act

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RBI cancelled the license of City Cooperative Bank (Maharashtra) and Purvanchal Cooperative Banks (Uttar Pradesh).

These banks lacked adequate capital and earning prospects and violated and Banking Regulation (BR) Act, 1949.
On liquidation of these UCBs, every depositor would be entitled to receive deposit insurance claim of up to ₹5,00,000/ as per the Deposit Insurance and Credit Guarantee Corporation Act, 1961.

About UCBs

Definition: UCBs, though not formally defined, refers to Primary Cooperative Banks located in urban and semi-urban areas.
- They could be either scheduled or non-scheduled.
Legal status
- Registered as cooperative societies either under the State Cooperative Societies Act of the State concerned or the Multi-State Cooperative Societies Act, of 2002.
- Banking activities are regulating by the RBI under BR Act, 1949
Lending
- Mandated to achieve priority sector lending target 75% by March 2026.
- Allowed to lend money for agricultural purpose.

High gross non-performing assets (GNPA) which was 10.9% till September 2023 (RBI’s Financial Stability report)
Lack of professional management and acute market competition with Small Finance Banks (SFBs), FinTechs, etc
Concentrated in few states (mostly in Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu).

NUCFDC: National Urban Cooperative Finance and Development Corporation Limited (NUCFDC) is an umbrella organisation of the UCBs.
Banking Regulation (Amendment) Act, 2020: Gives RBI powers to supersede boards of the Cooperative banks
Ease of expansion: Some UCBs are allowed to open new branches up to 10% (maximum 5 branches) of the existing number of branches in the previous financial year without prior approval from RBI.

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