The Reserve Bank of India issued the Urban Co-operative Banks and Rural Co-operative Banks Governance Amendment Directions, 2026 to strengthen governance norms and prevent directors from bypassing statutory tenure limits. Under the amended framework, directors of Urban Co-operative Banks (UCBs), State Co-operative Banks (StCBs), and Central Co-operative Banks (CCBs) can serve a maximum continuous tenure of ten years, following the Banking Laws (Amendment) Act, 2025 which increased the earlier eight-year limit. The RBI observed that some directors were temporarily resigning and returning to boards through re-election or co-option to continue beyond the permissible tenure. To curb this practice, the amendments introduce a mandatory three-year cooling-off period before such directors can rejoin the same bank’s board in any manner. During this cooling-off period, they cannot be associated with the bank except as members or customers. However, they may join another bank’s board if otherwise eligible. The amendments also clarify how continuous tenure will be calculated.
RBI issues final Amendment Directions on Cooling-off Period for Directors of Co-operative Banks (Urban & Rural) on 25th May 2026
RBI (Urban Co-operative Banks – Governance) Amendment Directions, 2026
Definition of Unban Co-operative Banks under RBI:
‘Under RBI guidelines, Urban Co-operative Banks (UCBs) are defined as Primary Co- operative Banks as per the Banking Regulation Act, 1949. The RBI has established a four tiered regulatory framework for UCBs based on deposit size, categorizing them into Tier 1, Tier 2, Tier 3, and Tier 4, with specific eligibility criteria for each tier. This framework aims to balance the needs of smaller banks with the growth ambitions of larger UCBs, ensuring proportionate regulation and financial resilience in the cooperative banking sector.’
Final Amendment:
- The Banking Regulation (Amendment) Act, 2020 had made Section 10A(2A)(i) of the Banking Regulation Act, 1949 (in short, “the Act”), which prescribed a ceiling on continuous tenure of directors, applicable to primary (urban) co-operative banks (hereinafter collectively referred to as ‘UCBs’ and individually as ‘UCB’).
- The provision had come into force for UCBs with effect from June 29, 2020. This provision was further amended by the Banking Laws (Amendment) Act, 2025 to increase the maximum continuous tenure of directors of UCBs from eight years to ten years and the amended provision has come into effect on August 1, 2025.
- In a few cases, directors have been found to be resorting to certain methods to circumvent the provisions of the Act, such as resigning briefly from office and being re-elected / co-opted to the Board within a short period of time, thereby continuing to be on the Board of a UCB for an extended period beyond the legally permissible tenure, which defeats the intent and spirit of the statutory provision.
- After paragraph 7 of the Reserve Bank of India (Urban Co-operative Banks – Governance) Directions, 2025, the following shall be inserted, namely: “7A. A director on the Board of a UCB, after completing a continuous tenure of ten years in office, shall be eligible to be re-appointed, whether by election or co-option or in any other manner, as a director on the Board of the same UCB only after undergoing a minimum cooling-off period of three years. During the cooling-off period, the said director shall not be associated with the UCB in any capacity / manner other than as a member / customer. This, however, shall not preclude him / her from being appointed as a director on the Board of another bank, if otherwise eligible.”
- Explanation: For calculating the period of continuous tenure, the total time served on the Board of the UCB including the period of directorship preceding an interruption of less than three years but excluding the period of directorship preceding at least a three-year interruption shall be reckoned.
RBI (Rural Co-operative Banks – Governance) Amendment Directions, 2026
Definition of Rural Unban Co-operative Banks under RBI:
“Under RBI guidelines, Rural Co-operative Banks are defined as State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs), as per the National Bank for Agriculture and Rural Development (NABARD) Act, 1981. These banks operate in rural areas to provide credit and banking services, primarily to agriculture and allied sectors.”
Final Amendments:
- The Banking Regulation (Amendment) Act, 2020 had made Section 10A(2A)(i) of the Banking Regulation Act, 1949 (in short, “the Act”), which prescribed a ceiling on continuous tenure of directors, applicable to State Co-operative Banks (hereinafter collectively referred to as ‘StCBs’ and individually as ‘StCB’) and Central Co-operative Banks (hereinafter collectively referred to as ‘CCBs’ and individually as ‘CCB’).
- The provision had come into force for StCBs and CCBs with effect from April 1, 2021. This provision was further amended by the Banking Laws (Amendment) Act, 2025 to increase the maximum continuous tenure of directors of StCBs and CCBs from eight years to ten years and the amended provision has come into effect on August 1, 2025.
- In a few cases, directors have been found to be resorting to certain methods to circumvent the provisions of the Act, such as resigning briefly from office and being re-elected / co-opted to the Board within a short period of time, thereby continuing to be on the Board of an StCB / CCB for an extended period beyond the legally permissible tenure, which defeats the intent and spirit of the statutory provision.
- After paragraph 7 of the Reserve Bank of India (Rural Co-operative Banks – Governance) Directions, 2025, the following shall be inserted, namely: “7A. A director on the Board of an RCB, after completing a continuous tenure of ten years in office, shall be eligible to be re-appointed, whether by election or co-option or in any other manner, as a director on the Board of the same RCB only after undergoing a minimum cooling-off period of three years. During the cooling-off period, the said director shall not be associated with the RCB in any capacity / manner other than as a member / customer. This, however, shall not preclude him / her from being appointed as a director on the Board of another bank, if otherwise eligible.”
- Explanation: “For calculating the period of continuous tenure, the total time served on the Board of the RCB including the period of directorship preceding an interruption of less than three years but excluding the period of directorship preceding at least a three-year interruption shall be reckoned.”
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