Jag tror inte att du kan skriva en UPDATE-sats i Oracle med en JOIN.
UPDATE INSURED_FARMERS I
SET I.CAP_NAME = ( SELECT S.CAP_NAME
FROM INDIAN_STATES_REGION S
WHERE UPPER(I.STATE_NAME_FI) = UPPER(S.STATE_NAME) )
WHERE EXISTS ( SELECT S.CAP_NAME
FROM INDIAN_STATES_REGION S
WHERE UPPER(I.STATE_NAME_FI ) = UPPER(S.STATE_NAME) )