RBI Moves to Strengthen Cooperative Bank's Financial Health and Digital Access

The Reserve Bank of India (RBI), in consultation with the Government of India, has announced a series of steps covering lending norms, governance rules, digital systems and deposit protection for cooperative banks.  

As per PIB, the measures apply to both urban and rural institutions and are aimed at improving operations and credit flow in the sector. 

Priority Sector Treatment for NCDC Loans 

From January 19, 2026, loans given by banks to the National Cooperative Development Corporation (NCDC) for onward lending to cooperative societies will qualify as priority sector lending. The classification will follow the categories set out in the Master Direction on Priority Sector Lending, 2025. 

The benefit will apply to all banks except Regional Rural Banks, Urban Cooperative Banks, Small Finance Banks, and Local Area Banks. NCDC is a statutory body under the Ministry of Cooperation that provides financial support to cooperative institutions across sectors. 

Changes To Branch Expansion and Housing Loans 

Urban Cooperative Banks (UCBs) have been permitted to open new branches. The housing loan exposure cap for these banks has also been increased from 10% to 25% of their total loans and advances. 

Separately, amendments to the Banking Regulation Act have extended the maximum tenure of directors on cooperative bank boards from 8 to 10 years. The change relates to board continuity and governance. 

Digital Support and Grievance Coverage 

Licensing fees for cooperative banks to join the Aadhaar-enabled Payment System (AePS) have been reduced. This lowers the cost of offering basic digital payment services. 

The National Urban Co-operative Finance and Development Corporation Limited (NUCFDC) has been set up as a non-deposit taking NBFC to provide IT and operational support to urban cooperative banks. 

For rural institutions, a shared services entity named Sahakar Sarthi has been created to deliver technology solutions. Rural cooperative banks have also been brought under the RBI’s Integrated Ombudsman Scheme. 

About Deposit Insurance 

Deposits in cooperative banks continue to be insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to ₹5 lakh per depositor per bank, including principal and interest. 

Read More: Reserve Bank of India to Inject Over ₹2 Lakh Crore Liquidity into Banking System! 

Conclusion 

The steps cover credit norms, governance changes, technology support and deposit protection across the cooperative banking network. 

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