RBI Permits Banks to Treat Lending to NCDC As Priority Sector Credit

The Reserve Bank of India (RBI) has announced that bank loans to the National Cooperative Development Corporation (NCDC) will be treated as priority sector lending.  

As per the reports, the rule will apply to loans sanctioned on or after January 19, 2026. The decision was taken after consultations with the Government of India. 

Conditions for Classification 

Banks can classify such loans under the priority sector only if the funds are used for activities listed in the Master Direction on Priority Sector Lending, 2025. The arrangement is meant for commercial banks that have priority sector lending targets.  

Regional Rural Banks, Urban Cooperative Banks, Small Finance Banks, and Local Area Banks have been kept out of this provision. 

Flow of Funds to Cooperative Societies 

The NCDC will use the borrowed funds to support cooperative societies. These societies are active in areas such as agriculture, storage, processing, marketing and rural industries. 

The corporation is a statutory body under the Ministry of Cooperation and provides financial assistance to cooperatives across the country. 

Other Steps for Cooperative Banks 

The central government and the RBI have also introduced measures aimed at improving the cooperative banking sector. Urban Cooperative Banks have been allowed to open new branches. Their housing loan exposure limit has been increased from 10% to 25% of total loans and advances. 

The Banking Regulation Act has been amended to extend the tenure of directors in cooperative banks from 8 years to 10 years. Fees for onboarding cooperative banks to the Aadhaar-enabled Payment System have also been reduced. 

Technology Support and Deposit Insurance 

A National Urban Co-operative Finance and Development Corporation has been set up to provide IT and operational support to urban cooperative banks.  

A shared services entity, Sahakar Sarthi, has been created to offer technology services to rural cooperative banks. Rural cooperative banks have also been brought under the RBI’s Integrated Ombudsman Scheme. 

Deposits in cooperative banks remain insured by the Deposit Insurance and Credit Guarantee Corporation up to ₹5 lakh per depositor, including interest. 

Read More: RBI Clarifies Gold, Silver Pledges Allowed Under MSE Collateral-Free Limit! 

Conclusion 

The change allows eligible bank lending to the NCDC to count towards priority sector targets, while related measures continue to address governance, technology and depositor protection. 

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