What changed
RBI lifted the moratorium on branch licensing for UCBs, which had been in place since 2004. Eligible UCBs can now open new branches or extension counters, subject to specific financial and governance criteria. The policy also requires all UCBs to obtain prior approval for extension counters, ending the earlier automatic approval for scheduled UCBs not in Grades II, III, or IV.
What it means for you
This relaxation allows well-managed UCBs to expand their branch networks, potentially increasing their deposit and lending reach. Banks must ensure compliance with stricter financial health norms (CRAR, NPAs, profitability) and governance standards (elected board with two professionals). The move signals RBI's confidence in the UCB sector's recovery but also tightens oversight by requiring prior approval for all extension counters.
What you must do
- Verify your bank's eligibility: CRAR ≥9%, net NPAs <10%, no CRR/SLR default in last year, net profit in last financial year, net worth ≥₹10 crore.
- Calculate average net worth per branch (including proposed centres) based on centre population: ≥₹2 crore for A/B centres, ≥₹1 crore for C/D centres.
- Ensure board is elected and has at least two professional directors; confirm state has signed MoU with RBI or bank is under Multi-State Act.
- Prepare application in Annex II format with board note and resolution, and submit to the concerned Regional Office.
- Limit new branches/ECs to 10% of existing branch network over two years; note that ECs now require prior approval.
Who it affects
All Primary (Urban) Cooperative Banks (UCBs), State governments that have signed MoUs with RBI, UCB boards and management teams, Regional Offices of RBI handling UCB supervision
What are the key financial eligibility criteria for opening new branches?
UCBs must have CRAR of at least 9%, net NPAs below 10%, no CRR/SLR default in the preceding year, net profit in the last financial year, net worth of ₹10 crore or more, and average net worth per branch (including proposed centres) of ₹2 crore in A/B centres and ₹1 crore in C/D centres.
Can UCBs open extension counters without prior RBI approval now?
No. The new policy requires all UCBs to obtain prior authorization from RBI for opening extension counters, ending the earlier automatic approval for scheduled UCBs not in Grades II, III, or IV.
How many new branches can an eligible UCB open under this policy?
Eligible UCBs can open additional branches or extension counters not exceeding 10% of their existing branch network, over a period of two years.