Urban Co-operative Banks (UCBs) recorded sturdy growth in FY25, marked by balance sheet expansion, accelerated credit growth, robust profitability, healthy asset quality and improved capital buffers, according to the latest Trend and Progress of Banking in India report by RBI.

The consolidated balance sheet of UCBs expanded by 4.4% in FY25, higher than 4.0% in the previous financial year. Credit growth accelerated to 6.7%, highest in six years, with improvement across both the scheduled and the non-scheduled UCBs. Deposit growth improved to 5.2% from 4.1% in FY24. This momentum continued into H1 FY26, with deposit growth at 6.8% and credit growth at 6.4% by end-September 2025. The credit-deposit ratio rose to 63.3%, signalling improved intermediation efficiency.

Structurally, the sector continues to consolidate. As of March 2025, 1,457 UCBs were in operation, with Tier 1 banks accounting for 57.5% of institutions. In absolute terms, total 1457 UCB deposits stood at ₹5.84 lakh crore, while advances reached ₹3.70 lakh crore. Although Tier 3 and Tier 4 banks together accounted for less than 6% of UCBs by number, they dominated the sector’s scale, accounting for more than half of total deposits, advances and assets, reflecting scale-led stability under the four-tier regulatory framework.

Tier-wise data shows a clear scale gradient –

  • 838 Tier 1 UCBs held deposits of ₹65,760 crore and advances of ₹43,991 crore
  • 535 Tier 2 UCBs accounted for ₹1.78 lakh crore in deposits and ₹1.10 lakh crore in advances
  • 78 Tier 3 UCBs reported ₹2.01 lakh crore in deposits and ₹1.23 lakh crore in advances
  • 6 Tier 4 UCBs held ₹1.39 lakh crore in deposits and ₹93,542 crore in advances

The statistics reflects the cumulative impact of regulatory reforms and consolidation. Data from the report shows that UCBs extended their multi-year recovery into FY25, marking a shift from balance sheet repair to steady, broad-based growth. Profitability strengthened sharply. Net profits rose 14.2% in FY25, following a 52% surge in FY24, supported by reduced provisioning and better asset quality. This translated into higher returns on assets and equity, indicating a structural improvement.

Asset quality continued to improve for the fourth consecutive year. The gross NPA ratio declined to 6.2% at end-March 2025, nearly half the 12.1% peak recorded in March 2021. Net NPAs fell to 0.7%, while the provision coverage ratio rose to 90.1%, reflecting balance sheet clean-up and harmonised provisioning norms. Although GNPAs edged up seasonally, they moderated to 7.6% by September 2025, down from 9.3% a year earlier. Capital buffers remained strong. More than 92% of UCBs maintained CRAR above 12%, while the sector-wide capital adequacy ratio improved to 18.0%, driven by stronger Tier 1 capital.

The sector met the 60% Priority Sector Lending (PSL) target in FY24, including sub-targets for micro enterprises (7.5%) and weaker sections (11.5%). By March 2025, MSMEs accounted for the largest share of UCB advances, with credit to micro enterprises increasing, signalling improved access for smaller borrowers.

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

Commenting on the report’s finding, Shri. Prabhat Chaturvedi, CEO, National Urban Cooperative Finance and Development Corporation Ltd (NUCFDC), Umbrella Organisation of the UCB sector, said, “The data published in the report indicates consistent improvement in the balance sheet of the UCB sector. The sector is navigating a sustainable growth path amid reforms and a renewed focus on governance and compliance. Many UCBs, some over a century old, remain a vital pillar of India’s financial inclusion architecture. Continued policy support will further strengthen the UCB ecosystem, deepen access to finance and promote a more equitable distribution of wealth in the country.”