Urban Co-operative Banks : Key Regulatory and Supervisory Issues and the Road Ahead

Soundness of the financial system participants is a key element of the financial stability framework. In India, the banking system plays a dominant role in the overall financial system. Therefore, one of the core objectives of the banking regulations is to ensure the safety of the banks from the financial distress and to protect the interests of depositors. However, the regulatory and supervisory structure has to remain alive to the existing weaknesses, unresolved issues and emerging challenges in order to stay on the curve. As a small though important part of the banking system, the urban co-operative banks (UCBs) perform important functions through their superior customer service and local reach. This paper discusses the key regulatory and supervisory challenges relating to the UCBs and suggests a way forward towards a healthy and vibrant UCB sector