Urban Co-operative Banks Maintain Strong Growth Momentum in FY25: RBI Report

New Delhi : Urban Co-operative Banks (UCBs) sustained a strong growth trajectory in FY25, supported by balance sheet expansion, faster credit growth, rising profitability, and better asset quality. According to the Reserve Bank of India’s latest Trend and Progress of Banking in India report, the sector has clearly moved from recovery to growth-led resilience.

Notably, Urban Co-operative Banks growth FY25 reflects the cumulative impact of regulatory reforms, consolidation, and stronger governance standards.

Balance Sheet Expansion and Credit Growth Accelerate

In FY25, the consolidated balance sheet of UCBs expanded by 4.4%, up from 4.0% in FY24. At the same time, credit growth accelerated to 6.7%, the highest level seen in six years. Growth was recorded across both scheduled and non-scheduled UCBs.

Meanwhile, deposit growth improved to 5.2%, compared with 4.1% in the previous year. This positive momentum continued into the first half of FY26. By end-September 2025, deposits grew by 6.8%, while credit expanded by 6.4%. As a result, the credit-deposit ratio increased to 63.3%, indicating better intermediation efficiency.

Consolidation Strengthens the UCB Sector

Structurally, consolidation continued across the sector. As of March 2025, 1,457 Urban Co-operative Banks were operational. Tier 1 banks accounted for 57.5% of total institutions.

In absolute terms, total deposits stood at ₹5.84 lakh crore, while advances reached ₹3.70 lakh crore. Although Tier 3 and Tier 4 UCBs together represented less than 6% of banks by number, they accounted for more than half of total deposits, advances, and assets. This distribution highlights scale-led stability under the four-tier regulatory framework.

Tier-Wise Distribution Highlights Scale Advantage

Tier-wise data reveals a clear scale gradient across the sector:

Tier 1 Urban Co-operative Banks

• 838 banks
• Deposits: ₹65,760 crore
• Advances: ₹43,991 crore

Tier 2 Urban Co-operative Banks

• 535 banks
• Deposits: ₹1.78 lakh crore
• Advances: ₹1.10 lakh crore

Tier 3 Urban Co-operative Banks

• 78 banks
• Deposits: ₹2.01 lakh crore
• Advances: ₹1.23 lakh crore

Tier 4 Urban Co-operative Banks

• 6 banks
• Deposits: ₹1.39 lakh crore
• Advances: ₹93,542 crore

Together, these figures underline how scale and consolidation are reshaping the UCB landscape.

Profitability and Asset Quality Show Sharp Improvement

Profitability strengthened further in FY25. Net profits rose by 14.2%, following a sharp 52% increase in FY24. Lower provisioning requirements and better asset quality supported this improvement. Consequently, returns on assets and equity improved, pointing to a structural turnaround.

Asset quality also improved for the fourth consecutive year. The gross NPA ratio declined to 6.2% at end-March 2025, nearly half of the 12.1% level recorded in March 2021. Net NPAs fell to 0.7%, while the provision coverage ratio increased to 90.1%.

Although GNPAs rose seasonally, they moderated to 7.6% by September 2025, compared with 9.3% a year earlier.

Strong Capital Buffers and PSL Performance

Capital adequacy across the sector remained robust. More than 92% of UCBs maintained a CRAR above 12%, while the overall capital adequacy ratio improved to 18.0%, driven mainly by stronger Tier 1 capital.

In addition, UCBs met the 60% Priority Sector Lending (PSL) target in FY24. This included sub-targets for micro enterprises (7.5%) and weaker sections (11.5%). By March 2025, MSMEs accounted for the largest share of advances, with credit to micro enterprises rising steadily.

UCBs Enter a Phase of Growth-Led Resilience

Taken together, Urban Co-operative Banks growth FY25 marks a decisive shift from balance sheet repair to sustained expansion. Regulatory clarity, consolidation, and improving financial metrics are repositioning UCBs as stable, community-focused intermediaries within India’s formal banking system.

Commenting on the findings, Shri Prabhat Chaturvedi, CEO of the National Urban Cooperative Finance and Development Corporation Ltd (NUCFDC), said the data reflects consistent balance sheet improvement across the sector. He added that continued policy support would further strengthen UCBs, deepen access to finance, and promote a more equitable distribution of wealth in India.

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