Urban Co-operative Banks

The Reserve Bank of India (RBI) has recently revoked the banking license of 2 Urban Co-operative Banks, due to non-compliance with the Banking Regulation Act, 1949.

About Urban Co-operative Banks (UCBs):

• Urban Co-operative Banks (UCBs), also known as Primary Cooperative Banks, operate mainly in urban and semi-urban areas and are registered as cooperative societies under either the State Cooperative Societies Act or the Multi-State Cooperative Societies Act, 2002.
• Their functions include offering credit and banking services to small-scale industries, retail traders, and individuals, along with other banking services like deposits, loans, remittances, and investment products.
• UCBs are regulated by the Reserve Bank of India (RBI) under the Banking Regulation Act, 1949, while the State or Central Registrar of Cooperative Societies oversees managerial, administrative, and other aspects.
• They adhere to regulatory norms similar to scheduled banks, including Priority Sector Lending (PSL), maintenance of Cash Reserve Ratio (CRR), and Statutory Liquidity Ratio (SLR).
• UCBs are owned and controlled by their members, typically individuals from the local community, who democratically elect a board of directors to manage the bank’s operations.
• In case of failure, the Deposit Insurance and Credit Guarantee Corporation of India (DICGCI) provides insurance up to ₹1 lakh per depositor, similar to commercial banks.