Business EconomyPosted at: Feb 10 2026 11:26PM


RBI unveils wide-ranging reforms to strengthen Cooperative Banks

New Delhi, Feb 10 (UNI) Minister of State for Finance Pankaj Chaudhary informed the Rajya Sabha on Tuesday about a comprehensive set of measures by the Government and Reserve Bank of India to bolster the cooperative banking sector's financial health, governance, digital access and depositor protection.
Under the reforms, loans sanctioned by banks to the National Cooperative Development Corporation (NCDC) for on-lending to cooperative societies will now qualify as priority sector lending under the revised Priority Sector Lending norms with effect from January 19, 2026.
This change is expected to facilitate greater institutional credit flow to cooperative societies engaged in priority economic activities and boost credit availability through the cooperative network.
The NCDC is a statutory body under the Ministry of Cooperation that provides financial assistance to cooperative institutions and supports the growth of the cooperative movement.
To strengthen cooperative banks further, regulators have introduced several operational, governance and technology-based initiatives.
Urban Cooperative Banks (UCBs) have been permitted to open new branches, expanding their outreach and service footprint.
The proportion of housing loans that UCBs can extend has been increased from 10 per cent to 25 per cent of their total loans and advances, enabling greater access to home financing in urban and semi-urban areas.
The Banking Regulation Act has been amended to extend the maximum tenure of directors on cooperative bank boards from eight years to ten years, aimed at enhancing continuity and stability in governance.
In another key move to boost digital inclusion, licensing fees for onboarding cooperative banks onto the Aadhaar enabled Payment System (AePS) have been reduced, making it easier and more cost-effective for these banks to offer digital payment services.
To provide shared technological support for Urban Cooperative Banks, the National Urban Co-operative Finance and Development Corporation Limited (NUCFDC) has been established as an umbrella non-banking financial company.
NUCFDC will supply IT infrastructure and operational support to help UCBs modernise and compete more effectively.
For rural cooperative banks, the 'Sahakar Sarthi' shared services entity has been set up to deliver technology services, helping these institutions adopt modern banking systems and improve efficiency.
Customer protection measures have also been strengthened. Rural cooperative banks have been included under the RBI's Integrated Ombudsman Scheme, giving bank customers a unified platform for grievance redressal.
In addition, all cooperative banks will continue to be covered by the Deposit Insurance and Credit Guarantee Corporation scheme, which insures deposits up to Rs 5 lakh per depositor per bank, covering both principal and interest.
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