RBI Governor Stresses Governance and Asset Quality Standards for Urban Co-operative Banks

Reserve Bank of India Governor Sanjay Malhotra on Monday underlined the need for stronger governance frameworks and prudent risk management practices during a meeting with senior leadership of select urban co-operative banks (UCBs). 

Focus on Governance and Credit Discipline 

During the interaction, the Governor emphasised the importance of maintaining high standards of governance, robust underwriting norms and close monitoring of asset quality. 

He highlighted that disciplined credit practices and effective oversight are essential for ensuring the long-term stability of the urban co-operative banking sector. 

Role of UCBs in Financial Inclusion 

Malhotra also reiterated the continued relevance of UCBs in credit delivery, particularly in underserved and semi-urban regions.  

He stressed the need for a customer-centric approach, ethical business conduct and timely grievance redressal to preserve depositor confidence and trust in co-operative banks. 

Policy Initiatives and Regulatory Engagement 

The meeting formed part of the RBI’s ongoing engagement with regulated entities and followed an earlier interaction held in March 2025.  

The Governor briefly referred to policy initiatives undertaken since then to strengthen the co-operative banking ecosystem, expressing confidence that these measures would support healthier growth of the sector. 

Context of Licensing Reforms 

The discussion comes amid the RBI’s recent release of a consultation paper on resuming licensing of urban co-operative banks after a pause since 2004.  

The proposal includes a minimum capital threshold and asset quality benchmarks, which are expected to be followed by draft regulatory norms. 

Read More: RBI Proposes Linking BRICS Digital Currencies to Boost Cross-Border Payments! 

Conclusion 

With renewed regulatory focus and proposed reforms, the RBI aims to reinforce the resilience, credibility and growth prospects of urban co-operative banks across the country. 

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