Draft Guidelines for ‘on tap’ Licensing of Urban Co-operative Banks has been issued by the Reserve Bank of India which will resume licensing of urban cooperative banks (UCBs) after more than two decades.

• An on-tap licensing system allows eligible applicants to submit applications and receive business or financial permits from a regulatory authority throughout the year rather than limiting applications to brief, specific submission windows.

Draft Guidelines for ‘on tap’ licensing of UCBs   

• Eligibility: Credit Co-operative Societies with at least 10 years of operations.
• Capital Requirements: Minimum ₹10,000 crore deposits and ₹300 crore net worth.
• Registration: Must be registered under the Multi-State Co-operative Societies Act, 2002.
• Financial Criteria: CRAR (Capital to Risk-Weighted Assets Ratio) ≥12% and Net NPA ≤3% based on audited financials.
  • CRAR is the ratio of a bank's capital to its risk-weighted assets, ensuring it has sufficient capital to absorb losses and maintain financial stability.
• Governance: Individual shareholding capped at 5%.
• Business Plan: Mandatory five-year plan covering financial inclusion, expansion, technology, risk management, HR, and regulatory compliance.
• Regulation: Licensed UCBs will be governed by Banking Regulation Act, 1949 (AACS), Reserve Bank of India Act, 1934, Foreign Exchange Management Act, 1999, Payment and Settlement Systems Act, 2007 etc.