RBI Announces New Steps to Support Cooperative Banks’ Growth and Development

In an effort to strengthen the cooperative banks, improve governance and enhance digital inclusion, the Reserve Bank of India (RBI) has announced important steps. These measures aim to improve credit availability.

One of the key measures announced is that the loans approved by the banks to the National Cooperative Development Corporation (NCDC) from January 19, 2026, for on-lending to cooperative societies will now be considered as priority sector lending. This has been announced in consultation with the Government of India.

NCDC is a government corporation that offers financial assistance to the cooperative societies for their growth and development.

The priority sector lending (PSL) is an initiative by the RBI that requires the banks to allocate a part of their lending to specific sectors of the economy. These loans are for the activities mentioned in the Master Direction on Priority Sector Lending, 2025.

The RBI and government have also introduced several other reforms for cooperative banks. These are as follows:

• Urban Cooperative Banks (UCBs) are now allowed to open new branches.
• The limit for housing loans has been increased from 10% to 25% of their total loans and advances for UCBs.
• The maximum term of directors of cooperative banks under the Banking Regulation Act has been changed from 8 years to 10 years.
• The fee for onboarding of cooperative banks to the Aadhar-enabled Payment System (AePS) has been reduced.
• A new organisation, the National Urban Co-operative Finance and Development Corporation Ltd (NUCFDC), has been established to offer Information Technology (IT) systems and operational support to urban cooperative banks.
• A shared services entity named ‘Sahakar Sarthi’ has been introduced to give technological help to rural cooperative banks.
• Rural cooperative banks are now part of the Integrated Ombudsman Scheme.
• The Deposit Insurance and Credit Guarantee Corporation (DICGC) will insure deposits up to Rs 5,00,000 per person in every cooperative bank.