I. Introduction and Overview

- The Reserve Bank of India (RBI) has, since 2014, revoked the licences of 78 Urban Cooperative Banks (UCBs) across various states. Notably, Maharashtra witnessed the highest number of revocations with 36 UCBs losing their licences.

- The revocation of licences impacted UCBs in seven states in a single year, 2024, undermining the financial stability of banks in Maharashtra, Karnataka, Uttar Pradesh, Gujarat, Rajasthan, Assam, and Andhra Pradesh.

II. Why this Matters: The Background

- The UCB licence cancellations from 2014 to 2024 were driven by several reasons including insufficient capital, unfruitful earning prospects, a deteriorating financial position, and operations prejudicial to depositors and the public.

- In 2024, 10 UCB licences were revoked, affecting banks across seven states, including two each in Maharashtra, Karnataka, UP, and one each in Gujarat, Rajasthan, Assam, and Andhra Pradesh.

- The preceding years, 2023 and 2022, also saw significant revocations with 14 and 12 UCBs losing their licences respectively.

III. Geographic Spread of Revocations 

- The state wise distribution of licence cancellations includes:

  * Maharashtra - 36 UCBs

  * Uttar Pradesh - 14 UCBs

  * Karnataka - 8 UCBs

  * Gujarat - 2 UCBs

- Other negatively impacted states include Rajasthan, Assam, Odisha, Andhra Pradesh, Telangana, West Bengal, Goa, Madhya Pradesh, Kerala.

IV. Regulatory Measures and Future Projections

- As a response, regulatory measures are being implemented to bolster the financial resilience of UCBs, including:

   * Expanding and strengthening UCBs

   * Upping of Housing Loan Limits for UCBs

   * Enforcing compliance with Priority Sector Lending (PSL) target of 75% by March 31, 2026

   * Adherence to prudential exposure limits of 15% for single borrowers and 25% for groups

   * Setting minimum loan limits to ensure that at least 50% of loans are below or equal to ₹25 lakh or 0.2% of Tier-I capital, up to ₹1 crore per borrower.

 V. Status of Rural Cooperative Banks

- Despite the challenges in the UCB sector, no State Cooperative Banks (StCBs) or District Central Cooperative Banks (DCCBs) have been closed since 2014, indicating higher stability in these sectors compared to their urban counterparts.  

 VI. General Knowledge Takeaways

 - An understanding of the functioning of RBI, UCBs, StCBs, and DCCBs can be beneficial 

 - Knowledge about Priority Sector Lending (PSL) norms and loan limits as per RBI guidelines

 - Insights into the financial health of different regions in India, through the distribution of revocations

 - Information about recent regulatory measures and reforms in the banking sector.