RBI cancels licence of 78 UCBs since 2014; highest in Maharashtra

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The Reserve Bank of India (RBI) has cancelled the licenses of 78 Urban Cooperative Banks (UCBs) since calendar year 2014, of which 46 percent are from Maharashtra, according to documents tabled in Parliament.

Inadequate capital, poor earning prospects, deteriorating financial position, and the continuation of operations being prejudicial to the interests of depositors and the public at large, stated Pankaj Chaudhary, Union Minister of State for Finance in a reply tabled in Rajya Sabha on July 30.

In 2024 alone (till July), licenses of 10 UCBs were cancelled of which two each are in Maharashtra, Karnataka and Uttar Pradesh, while one each is from Gujarat, Rajasthan, Assam and Andhra Pradesh. In 2023, licenses of 14 UCBs and in 2022 licenses of 12 UCBs were cancelled. 

However, if the overall figures since 2014 is taken into account, then Maharashtra leads with 36 co-operative banks losing their licenses, followed by Uttar Pradesh (14 banks) and Karnataka (8 banks). Two UCBs in Gujarat have also lost their licences during this period with the latest being Shree Mahalaxmi Mercantile Co-operative Bank Ltd., Dabhoi, which lost its licence in January 2024.

Apart from these states, UCBs in Rajasthan, Assam, Odisha, Andhra Pradesh, Telangana, West Bengal, Goa, Madhya Pradesh and Kerala have also lost license during the last one decade.

The Union government in its reply in Rajya Sabha also stated that RBI has implemented several measures to expand the operations and strengthen the financial health of cooperative banks including Urban Cooperative Banks (UCBs). The steps include increased Housing Loan Limits for UCBs.

“RBI has mandated a phased approach for Urban Cooperative Banks (UCBs) to comply with a Priority Sector Lending (PSL) target of 75 per cent of adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposure (CEOBSE) by March 31, 2026. UCBs have to adhere to prudential exposure limits of 15 per cent for a single borrower/party and 25 per cent for a group of connected borrowers/parties, based on their Tier-I capital. Additionally, at least 50 per cent of their loans must be in amounts not exceeding ₹25 lakh or 0.2 per cent of Tier-capital, up to a maximum of ₹1 crore per borrower/party,” it added.

The reply in Rajya Sabha also stated that none of the Rural Cooperative Banks viz. State Cooperative Banks (StCBs)/District Central Cooperative Banks (DCCBs) have been closed since 2014.