The Urban Cooperative Banks (UCBs) were initially permitted to operate within the urban/semi-urban centre only. However, as per the recommendations of the Marathe Committee, UCBs were allowed to extend the area of operation to semi-urban and urban centres and the peripheral rural areas within a distance of 10 kms from boundaries of these centres within the district of their registration in 1994. However, UCBs are now allowed to open branches anywhere in their approved area of operation and also permitted to finance agricultural (both direct and indirect) and the loans for agricultural activities are reckoned as priority sector advances.

 In view of the above, UCBs over the years have increasingly played a critical role in the rural segment. The Agricultural credit (both direct and indirect) extended by UCBs under the priority sector stood at ₹ 5791 crore as on March 31, 2014 which was 5.934% of the total priority sector advances (Rs. 97587 crore) of the UCBs and 2.9% of the total advances (Rs. 199651 crore) of the UCBs

 Financially Sound and Well Managed (FSWM) UCBs having a networth of more than ₹ 50 crore are permitted to open Off-site/mobile ATMs without the approval of RBI subject to reporting within a fortnight of opening the ATM. FSWM UCBs not fulfilling the networth criteria are required to take prior approval of RBI for opening off-site/mobile ATMs.

 This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

Priority sector classification: urban cooperative banks may finance agriculture and open branches within approved areas, with ATM rules. UCBs may extend operations into semi-urban and peripheral rural areas within their approved area and open branches anywhere in that area; they are permitted to finance direct and indirect agricultural activities which qualify as priority sector advances. Off-site/mobile ATM permissions depend on FSWM status and a net-worth threshold: FSWM UCBs meeting the net-worth criterion may open such ATMs without prior approval but must report openings promptly, whereas those not meeting the criterion require prior approval.