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In a significant step towards strengthening India’s cooperative banking ecosystem, the Reserve Bank of India (RBI), in consultation with the Government of India, has announced a series of reforms aimed at improving financial health, governance, digital inclusion, and credit flow to cooperative institutions.

Priority Sector Boost for Cooperative Societies

One of the key announcements is that loans sanctioned by banks to the National Cooperative Development Corporation (NCDC) on or after January 19, 2026, for on-lending to cooperative societies, will now qualify as Priority Sector Lending (PSL) under the respective categories.

This benefit applies to banks other than:

• Regional Rural Banks (RRBs)

• Urban Cooperative Banks (UCBs)

• Small Finance Banks

• Local Area Banks

The loans must be aligned with activities specified in the Master Direction on Priority Sector Lending, 2025.

Role of NCDC in Strengthening Cooperatives

The National Cooperative Development Corporation (NCDC) is a statutory body under the Ministry of Cooperation, playing a crucial role in financing cooperatives and accelerating the growth of the cooperative movement across India. The revised PSL norms are expected to significantly enhance the flow of institutional credit to cooperative societies through NCDC.

Key Measures Announced for Cooperative Banks

The Government of India and RBI have jointly undertaken several reforms to strengthen cooperative banks. These include:

• Urban Cooperative Banks (UCBs) allowed to open new branches

• Housing loan limits for UCBs increased from 10% to 25% of total loans and advances

• Amendment to the Banking Regulation Act, increasing directors’ tenure from 8 years to 10 years

• Reduced licensing fees for onboarding cooperative banks to the Aadhaar Enabled Payment System (AePS)

• Establishment of NUCFDC (National Urban Co-operative Finance and Development Corporation Ltd.), an NBFC acting as an umbrella organisation for UCBs to provide IT infrastructure and operational support

• Creation of a Shared Services Entity (SSE) – ‘Sahakar Sarthi’ to deliver technological services to Rural Cooperative Banks

• Inclusion of Rural Cooperative Banks under RBI’s Integrated Ombudsman Scheme

• Deposit Insurance Coverage by DICGC up to ₹5 lakh per depositor per bank, including principal and interest, for all cooperative banks

  Why This Matters

  These reforms aim to:

• Improve governance and operational efficiency

• Enhance digital adoption and customer protection

• This information was shared by Shri Pankaj Chaudhary, Minister of State in the Ministry of Finance, in the Rajya Sabha

• Increase credit availability to grassroots cooperative institutions

• Strengthen depositor confidence in cooperative banks