The Urban Banks Department looks after the regulation and supervision of primary co-operative banks. The banks are outside the federal rural credit structure supervised by NABARD and function primarily in the urban areas.

The activities of the Department can be broadly divided into four areas, viz., regulatory, supervisory, operational and developmental.

The regulation and supervision of primary co-operative banks, popularly known as "urban co-operative banks", is performed by the Urban Banks Department in co-ordination with the Registrars of Co-operative Societies of the State Governments.

The Reserve Bank of India regulates the interest rates on deposits and advances only to the extent of prescribing interest rate on saving accounts and a minimum lending rate on advances. It prescribes minimum cash reserve and liquid assets to be maintained as a ratio of net demand and time liabilities, and also lays down norms for investments in other assets by primary co-operative banks.

The Department coordinates the refinance facilities granted by the Reserve Bank of India to State Co-operative Banks on behalf of urban co-operative banks for financing 22 broad groups of approved cottage and tiny industries as an incentive for financing industrial activities.

As a part of developmental activity, the Reserve Bank of India conducts special courses for senior personnel of urban co-operative banks at its College of Agricultural Banking, Pune.

The Reserve Bank has recently reviewed the new bank licensing policy for cooperative banks and the branch licensing policy for them in pursuance of the recommendations of a High Power Committee under the Chairmanship of Shri K. Madhava Rao, Member, Central Board, Reserve Bank of India.

In coordination with state co-operative departments and the apex co-operative banks, the Reserve Bank closely monitors the performance of a co-operative banks identified as `weak' in different states.