The Reserve Bank of India (RBI) on Wednesday announced a series of regulatory measures, including the resumption of ‘on-tap’ licensing for Urban Co-operative Banks (UCBs), a review of concentration risk norms for Rural Co-operative Banks (RCBs), and plans to rationalise the framework governing interest rates on advances.
The measures were announced in the RBI’s Statement on Developmental and Regulatory Policies, released alongside the Monetary Policy Committee’s (MPC) policy decision.
The central bank said it had published a discussion paper on January 13, 2026, seeking stakeholder feedback on the licensing of Urban Co-operative Banks after a gap of nearly two decades. Based on the feedback received, the RBI has decided to resume issuing UCB licences on an ‘on-tap’ basis.
Draft guidelines outlining the new licensing framework will be released shortly for public consultation, the RBI said.
The central bank also proposed a review of prudential norms governing concentration risk management for Rural Co-operative Banks. The existing Credit Monitoring Arrangement guidelines have been in force since 2008.
According to the RBI, the banking sector, including the co-operative banking segment, has undergone significant expansion and structural changes since then. The review aims to promote the growth of the co-operative banking sector while addressing prudential concerns arising from concentrated lending. Draft amendment directions will be issued for stakeholder consultation.
Separately, the RBI announced plans to rationalise the regulatory framework governing interest rates on advances for all regulated entities through a principle-based approach.
The proposed changes seek to harmonise lending rate guidelines across regulated entities while maintaining proportionality. They will also address operational aspects of the Marginal Cost of Funds-based Lending Rate (MCLR) and External Benchmark Lending Rate (EBLR) frameworks, and standardise market practices relating to interest calculation, including day-count conventions and benchmark reset dates.
According to the RBI, the proposed measures are intended to enhance transparency and uniformity in loan pricing, strengthen monetary policy transmission and improve consumer protection. Draft directions on the proposed changes will be issued shortly for public comments.
The regulatory measures were announced by RBI Governor Sanjay Malhotra following the conclusion of the Monetary Policy Committee’s meeting.
(With inputs from ANI)
