RBI Tightens UCB Framework with New Lending and Capacity Reforms

The Reserve Bank of India has announced a fresh set of regulatory steps aimed at strengthening Urban Cooperative Banks (UCBs), alongside its latest monetary policy outcome.  

The measures are part of a wider reform push focused on customer protection, financial inclusion, smoother credit flow and improved ease of doing business across the financial system. 

New Lending and Operational Flexibility for UCBs 

Announcing the policy decisions after the Monetary Policy Committee meeting, Governor Sanjay Malhotra said 4 targeted reforms have been cleared to improve the lending ability and operational strength of UCBs.  

One key change is the increase in permitted limits for unsecured loans and credit extended to nominal members, aimed at expanding last-mile credit delivery while maintaining risk controls.  

In addition, regulatory conditions linked to loan tenor and moratorium requirements on housing loans issued by Tier III and Tier IV UCBs will be removed, giving smaller cooperative banks greater flexibility in offering home loans and competing with larger lenders. 

Capacity Building Through Mission-SAKSHAM 

To improve governance standards and technical capability within the cooperative banking ecosystem, the central bank has launched Mission-SAKSHAM (Sahakari Bank Kshamta Nirman).  

The programme targets structured training and skill development for more than 1.4 lakh participants associated with UCBs, covering managerial, compliance and operational areas. The regulator said these steps are intended to position cooperative banks for more sustainable growth and stronger grassroots credit support. 

Read More: Total Return Swaps to be Introduced by RBI to Deepen Corporate Bond Market! 

Conclusion 

Alongside these UCB-focused reforms, the MPC kept the repo rate unchanged at 5.25% with a neutral stance, while signalling continued attention to financial stability and inclusion through calibrated regulatory changes. 

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