New Delhi, February 10 – In a significant move to fortify the cooperative banking sector, the Reserve Bank of India (RBI) is collaborating closely with the Central Government. This partnership aims to enhance financial stability, operational efficiency, digital inclusion, deposit safety, credit availability, and prudent regulation for cooperative banks across the country.
Union Minister of State for Finance Pankaj Chaudhary shared these updates in the Rajya Sabha on Tuesday. He highlighted that from January 19, 2026, loans approved by banks to the National Cooperative Development Corporation (NCDC) for onward lending to cooperatives will qualify as priority sector lending (PSL). This applies to a wide range of banks, including regional rural banks, urban cooperative banks, small finance banks, and local area banks, excluding certain others.
The eligible loans cover purposes and activities outlined in the Priority Sector Lending Master Directions, 2025. Chaudhary emphasized that urban cooperative banks can now open new branches freely and allocate up to 25% of their loan book to housing finance, up from the previous 10% limit.
Further reforms include amendments to the Banking Regulation Act, extending directors’ tenure from 8 to 10 years. The license fee for Aadhaar-enabled Payment System (AePS) integration has been reduced for cooperative banks. The National Urban Cooperative Finance and Development Corporation Limited (NUCFDC), a non-deposit-taking NBFC, has been established as an umbrella organization to provide IT infrastructure and operational support to urban cooperative banks.
For rural cooperatives, the ‘Sahkar Sarathi’ portal offers technical services, and RBI has integrated rural cooperative banks into the Integrated Ombudsman Scheme. These measures signal a comprehensive overhaul, promising a more robust and inclusive cooperative banking ecosystem that supports millions of depositors and borrowers nationwide.