New Delhi: The Government of India, in coordination with the Reserve Bank of India (RBI), has undertaken a series of measures to improve the financial stability, governance standards and digital reach of cooperative banks, while also enhancing depositor protection and credit flow, the Rajya Sabha was informed on Tuesday.
Minister of State for Finance Pankaj Chaudhary said the initiatives are aimed at reinforcing the cooperative banking sector through regulatory reforms, institutional support and technology-driven inclusion.
To support expansion and improve customer access, Urban Cooperative Banks have been allowed to open new branches. In addition, the limit on housing loan exposure for these banks has been increased to 25 per cent of their total loans and advances, up from the earlier cap of 10 per cent, with the objective of improving credit availability in the housing sector.
In a move to ensure greater continuity in governance, amendments to the Banking Regulation Act have extended the maximum tenure of directors of cooperative banks from eight years to ten years. The change is intended to allow experienced boards to provide longer and more consistent oversight.
The government has also taken steps to promote digital transactions and financial inclusion. The licensing fee for onboarding cooperative banks onto the Aadhaar Enabled Payment System has been reduced, making it easier for smaller institutions to adopt digital payment platforms.
To strengthen institutional backing for Urban Cooperative Banks, the National Urban Co-operative Finance and Development Corporation Limited has been set up as a non-deposit-taking non-banking financial company. The entity will function as an umbrella organisation, offering technology infrastructure and operational assistance to UCBs.
For rural cooperative institutions, a Shared Services Entity named Sahakar Sarthi has been established to provide common technological services, helping improve efficiency and lower operational expenses.
Customer protection has also been enhanced by bringing Rural Cooperative Banks under the RBI’s Integrated Ombudsman Scheme, allowing customers access to a single, streamlined grievance redressal system.
On deposit security, the Deposit Insurance and Credit Guarantee Corporation continues to insure deposits of all cooperative banks up to Rs 5 lakh per depositor per bank, covering both principal and interest.
The minister also noted that loans sanctioned by banks to the National Cooperative Development Corporation as of January 19, 2026, for on-lending to cooperative societies, will qualify as priority sector lending under the applicable categories.
