The Reserve Bank of India (RBI) has canceled the licenses of 78 Urban Cooperative Banks (UCBs) since 2014. Of these, 46 percent are from Maharashtra, according to documents tabled in Parliament.
Reasons for License Cancellations
Union Minister of State for Finance, Pankaj Chaudhary, stated in a Rajya Sabha reply on July 30 that the cancellations were due to inadequate capital, poor earning prospects, a deteriorating financial position, and the continuation of operations being prejudicial to the interests of depositors and the public.
License Cancellations in 2024
In 2024 alone (up to July), the licenses of 10 UCBs were canceled. Among these, two each are from Maharashtra, Karnataka, and Uttar Pradesh, while one each is from Gujarat, Rajasthan, Assam, and Andhra Pradesh. In 2023, 14 UCB licenses were canceled, and in 2022, 12 licenses were revoked.
Overall Figures Since 2014
Since 2014, Maharashtra has seen the highest number of license cancellations, with 36 UCBs losing their licenses. Uttar Pradesh follows with 14 banks, and Karnataka has 8 banks. Gujarat has also experienced the loss of two UCBs, the latest being Shree Mahalaxmi Mercantile Co-operative Bank Ltd., Dabhoi, which lost its license in January 2024.
Other Affected States
In addition to Maharashtra, Uttar Pradesh, Karnataka, and Gujarat, UCBs in Rajasthan, Assam, Odisha, Andhra Pradesh, Telangana, West Bengal, Goa, Madhya Pradesh, and Kerala have also lost licenses over the past decade.
RBI Measures to Strengthen Cooperative Banks
The Union government has indicated that the RBI has implemented several measures to enhance the operations and financial health of cooperative banks, including Urban Cooperative Banks. These measures include increasing housing loan limits for UCBs and mandating a phased approach for UCBs to comply with a Priority Sector Lending (PSL) target of 75 percent of adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposure (CEOBSE) by March 31, 2026. UCBs must also adhere to prudential exposure limits of 15 percent for single borrowers/parties and 25 percent for groups of connected borrowers/parties, based on their Tier-I capital. Furthermore, at least 50 percent of their loans must be in amounts not exceeding ₹25 lakh or 0.2 percent of Tier-I capital, up to a maximum of ₹1 crore per borrower/party.
Status of Rural Cooperative Banks
The Rajya Sabha reply also noted that none of the Rural Cooperative Banks, including State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs), have been closed since 2014.
