Amit Shah Seeks Stronger RBI-UCB Partnership to Expand Small-Business Credit

Union Minister of Cooperation Amit Shah on Saturday urged Urban Cooperative Banks (UCBs) to change their approach towards the Reserve Bank of India (RBI), saying the central bank has increasingly acted as a facilitator for the sector rather than merely as a regulator. Speaking at the inauguration of the new office building of the National Urban Cooperative Finance and Development Corporation (NUCFDC) at the BSE in Mumbai, Shah said UCBs and the RBI must move beyond their longstanding perceptions of each other and work together to strengthen the cooperative banking system.

Addressing executives and stakeholders from more than 1,400 UCBs, Shah said his five years as Cooperation Minister showed that the RBI had proactively supported the sector whenever proposals were pursued with confidence. He cited relaxed branch-opening norms, doorstep banking, permission to issue demand drafts and life certificates, and a dedicated nodal officer for UCB matters. He also welcomed higher gold-loan limits and one-time settlement provisions.

UCBs play a significant role in India's local credit network by mobilising deposits and lending to small borrowers, traders, micro enterprises and self-employed people. RBI data showed 1,457 UCBs operating as of March 2025, with outstanding loans of ₹3.69 lakh crore and deposits exceeding ₹6 lakh crore.

Their role also extends to financial inclusion. Under the revised Priority Sector Lending framework, UCBs have an overall target of 60%, including 7.5% for micro enterprises and 12% for weaker sections. Eligible categories include SC/ST borrowers, small and marginal farmers, artisans, self-help groups and beneficiaries of specified livelihood programmes.

Shah recalled his experience of heading a Gujarat UCB, saying its collateral-free loans of up to ₹2.5 lakh recorded repayment, including interest, of more than 99%, while lending under the scheme doubled.

The sector is also entering a new regulatory phase. RBI Governor Sanjay Malhotra has announced progress towards on-tap licensing of UCBs, ending a more than two-decade pause. The move could widen the sector, while placing greater emphasis on governance, capital adequacy, risk management and depositor protection.

Shah urged UCBs to join NUCFDC, which currently has 690 members, and called for lower membership fees so all banks can benefit from technical expertise, compliance assistance and cybersecurity solutions. A Security Operations Centre has also been established.

NUCFDC will shift its headquarters from New Delhi to Maharashtra, which has about 449 UCBs. Telangana has 51 UCBs and Andhra Pradesh 41, underlining the sector's regional reach.

Citing Amul's ₹1.25 lakh crore turnover, Shah said greater cooperation could help UCBs scale up while supporting sole proprietors, entrepreneurs and small businesses, strengthening their contribution to India's development and financial inclusion.