The Reserve Bank of India (RBI), in collaboration with the Central Government, has introduced four crucial measures to bolster the strength of 1,514 Urban Co-operative Banks (UCBs) in the country. These initiatives were announced following detailed discussions between Union Home Minister and Minister of Cooperation Amit Shah, Finance Minister Nirmala Sitharaman, and RBI Governor, with the objective of achieving Prime Minister Narendra Modi’s vision of ‘Sahakar se Samridhi.’ This article highlights the key measures that have been notified by the RBI, which include allowing UCBs to open new branches, facilitating One Time Settlements, extending the deadline to meet priority sector lending targets, and designating a Nodal Officer in the RBI.
Opening New Branches:
UCBs now have the opportunity to expand their reach by opening new branches without prior approval from the RBI. They can open up to 10% (maximum of 5 branches) of the total number of branches in the previous financial year within their approved area of operation. However, UCBs must ensure their policies are approved by their respective boards and comply with the Financially Sound and Well Managed (FSWM) norms.
One Time Settlements:
In a significant move, UCBs have been granted the authority to offer One Time Settlements (OTS) on par with commercial banks. With the approval of their board, cooperative banks can now provide a process for technical write-off and settlement with borrowers. This development brings UCBs at par with other commercial banks and enables them to streamline their lending practices and recover bad debts more effectively.
Extension of Deadline for Priority Sector Lending Targets:
Recognizing the challenges faced by UCBs in meeting priority sector lending targets, the RBI has extended the timeline by two years. UCBs now have until March 31, 2026, to achieve the set targets. This extension provides these banks with additional time to align their lending activities with priority sectors, such as agriculture, micro, small, and medium enterprises (MSMEs), education, housing, and more. It will enable UCBs to contribute significantly to the growth and development of these sectors.
Designation of Nodal Officer in RBI:
To facilitate better communication and coordination between UCBs and the RBI, a Nodal Officer will be designated within the central bank. This dedicated point of contact will serve as a liaison and address queries, concerns, and grievances raised by UCBs. The Nodal Officer’s role will be instrumental in strengthening the relationship between UCBs and the regulatory authority, fostering transparency, and promoting smoother operations.