Reserve Bank of India Proposes New Regulatory Measures for Banking Sector

The Reserve Bank of India has announced key developmental and regulatory policy measures aimed at modernizing financial oversight, expanding bank licensing, and standardizing interest rate practices across regulated financial institutions.

Following a two-decade pause on issuing new licenses for Urban Co-operative Banks (UCBs), the central bank decided to resume licensing on an 'on tap' basis. The decision follows stakeholder feedback on a discussion paper released in January 2026, with formal draft guidelines to be published shortly for public consultation.

In addition, the central bank is reviewing prudential norms for Concentration Risk Management in Rural Co-operative Banks (RCBs). The existing framework, governed by Credit Monitoring Arrangement instructions established in 2008, is being revised to manage concentrated lending risks while supporting the growth of the co-operative banking sector.

The regulator also proposed a principle-based rationalization of interest rate guidelines for all Regulated Entities. This effort seeks to harmonize rules across institutions, refine operational elements of MCLR and EBLR frameworks, and standardize practices regarding day count conventions and benchmark reset dates to improve loan pricing transparency.