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Licensing Policy of New Urban Co-operative Banks
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Licensing Policy of New Urban Co-operative Banks - September 16th, 2010

Licensing Policy of New Urban Co-operative Banks

At the inception, financial soundness of the bank can be ensured by adequate entry point norms. These norms have to be evolved taking into account relevant criteria like the location of the bank and the area of its operation.

Entry point norms can also be used as an instrument to encourage the growth of such banks in areas where greater need exists and to discourage their growth in areas where such a need is not perceived.


Efficient management of the bank could also be ensured by initially specifying other non-financial criteria like the composition of the board of directors, the suitability of the promoters and the adequacy of the proposed management.


Entry Point Norms for UCBs

Capital Membership
Category of Centre (Rs. in crores) Nos.
A - population over 15 lakhs 5.00 3000
B - population over 10 lakhs but not exceeding 15 lakhs 2.50 2500
C - population over 5 lakhs but not exceeding 10 lakhs 2.00 2000
D - population over 2 lakhs but not exceeding 5 lakhs 1.00 1500
E - population not exceeding 2 lakhs 0.50 1000



The Committee felt that entry point norms (EPN) should be on par with peer groups like Local Area Banks and RRBs whose clientele and area of operation are broadly similar to UCBs. The Committee also felt that the existing low EPN is one of the major causes for weakness of UCBs. The Committee, therefore, recommended 5 grades of increased EPN compared to the then existing 3 grades.


Good corporate governance is critical to efficient functioning of an entity and more so for banking entity. The Committee, therefore, suggested that atleast 2 directors with suitable banking experience or relevant professional background should be present on the Boards of UCBs and the promoters should not be defaulters to any financial institutions or banks and should not have any association with NBFC/co-operative bank or commercial bank in the capacity of Directors on the Board of Directors.
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