The Reserve Bank of India, through RBI/DoS/2026-27/453, DoS.CO.PPG.47/11.01.005/2026-27 dated 31 July 2026, has issued the Reserve Bank of India (Rural Co-operative Banks – Miscellaneous) Supervisory Directions, 2026 with immediate effect under Section 35-A read with Section 56 of the Banking Regulation Act, 1949. The Directions apply to State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs). They require banks to review their practices relating to loan disbursal, application of interest and other charges, charging of Equated Monthly Instalments (EMIs), and take corrective action, including system-level changes, to address unfair practices. The Directions identify practices such as charging interest from the loan sanction date instead of the actual disbursement date, charging EMIs on the sanctioned rather than the disbursed amount, not communicating changes in amortisation schedules after part-disbursements, charging interest for an entire month despite part-month loan outstanding, and collecting advance instalments while charging interest on the full loan amount. Banks may use online account transfers instead of cheques for loan disbursal. The Directions also repeal earlier directions on the covered areas while preserving actions taken under the repealed framework.
Reserve Bank of India
RBI/DoS/2026-27/453
DoS.CO.PPG.47/11.01.005/2026-27 | Dated: July 31, 2026
Reserve Bank of India (Rural Co-operative Banks – Miscellaneous) Supervisory Directions, 2026
In exercise of the powers conferred by Section 35-A read with Section 56 of the Banking Regulation Act, 1949 and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.
Chapter I – Preliminary
A. Short Title and Commencement
1. These Directions shall be called the Reserve Bank of India (Rural Co-operative Banks – Miscellaneous) Supervisory Directions, 2026.
2. These Directions shall come into effect immediately upon issuance.
B. Applicability
3. These Directions shall be applicable to Rural Co-operative Banks (hereinafter collectively referred to as ‘banks’ and individually as ‘bank’).
For the purpose of these Directions, ‘Rural Co-operative Banks’ shall mean State Co-operative Banks (collectively referred to as ‘StCBs’ and individually as ‘StCB’) and Central Co-operative Banks (collectively referred to as ‘CCBs’ and individually as ‘CCB’), as defined in the National Bank for Agriculture and Rural Development Act, 1981.
C. Definitions
4. All expressions used in these Directions, shall have the same meaning as have been assigned to them under the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the Companies Act, 2013, or any statutory modification or re-enactment thereto or other regulations issued by RBI or the Glossary of Terms published by RBI or as used in commercial parlance, as the case may be.
Chapter II – Fair Practices Code for Lenders – Charging of Interest
5. The bank, in the interest of fairness and transparency, shall review its practices regarding mode of disbursal of loans, application of interest and other charges, charging of Equated Monthly Instalments (EMIs), and take corrective action, including system level changes, as may be necessary, to address unfair practices, some of which are briefly explained below:
(1) Charging of interest from the date of sanction of loan or execution of loan agreement and not from the date of actual disbursement of funds to the customer. For loans disbursed by cheque, charging interest from the cheque date while handing over the cheque to the customer several days later.
(2) Charging of EMIs on the sanctioned loan amount rather than on the actual disbursed amount, without the knowledge or consent of the borrower.
(3) Any changes in the amortisation schedule originally provided in the Key Facts Statement (KFS), with each part-disbursement of loan, not being communicated to the borrowers.
(4) In case of disbursal or repayment of loans during a month, charging interest for the entire month rather than charging interest only for the period for which the loan was outstanding.
(5) Collecting one or more instalments in advance but reckoning the full loan amount for charging interest.
6. These and other such non-standard practices of charging interest are not in consonance with the spirit of fairness and transparency while dealing with customers. These are matters of serious concern to RBI.
7. The bank may use online account transfers in lieu of cheques for loan disbursal.
Chapter III – Repeal and Other Provisions
A. Repeal and Saving
8. With the issue of these Directions, the existing directions, instructions, and guidelines relating to the areas covered in these Directions as applicable to Rural Co-operative Banks stand repealed, as communicated vide circular no. DoS.CO.PPG.66/11.01.005/2026-27 dated July 31, 2026. The Directions, instructions, and guidelines repealed prior to the issuance of these Directions shall continue to remain repealed.
9. Notwithstanding such repeal, any action taken or purported to have been taken, or initiated under the repealed Directions, instructions, or guidelines shall continue to be governed by the provisions thereof. All approvals or acknowledgments granted under these repealed lists shall be deemed as governed by these Directions. Further, the repeal of these directions, instructions, or guidelines shall not in any way prejudicially affect:
(1) any right, obligation or liability acquired, accrued, or incurred thereunder;
(2) any penalty, forfeiture, or punishment incurred in respect of any contravention committed thereunder;
(3) any investigation, legal proceeding, or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid; and any such investigation, legal proceedings or remedy may be instituted, continued, or enforced and any such penalty, forfeiture or punishment may be imposed as if those directions, instructions, or guidelines had not been repealed.
B. Application of Other Laws Not Barred
10. The provisions of these Directions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations, or directions, for the time being in force.
C. Interpretations
11. For the purposes of giving effect to the provisions of these Directions or for removing any difficulties in their application or interpretation, RBI may, if it deems necessary, issue such clarifications as it considers appropriate in respect of any matter covered herein. The interpretation of any provision of these Directions by RBI shall be final and binding on all concerned entities.
(Tarun Singh)
Chief General Manager
