Government of India Amends Banking Regulation Rules for Co-operative Banks

New Delhi, December 10, 2025.—The Ministry of Finance, Department of Financial Services, has issued an Extraordinary Notification in The Gazette of India, implementing significant changes to the regulatory framework governing co-operative banks. The notification introduces the Banking Regulation (Co-operative Societies) Amendment Rules, 2025, which will come into effect on December 15, 2025..

The amendments, made in consultation with the Reserve Bank of India (RBI), primarily focus on clarifying the process for removing directors who do not meet eligibility criteria and streamlining reporting requirements, demonstrating a move toward stricter governance and compliance in the co-operative banking sector..

A central feature of the new rules is the insertion of a new definition and a detailed procedure for dealing with non-compliant directors, aiming to strengthen the professional competence of Co-operative Bank Boards.

1. Formal Definition of “Ineligible Director”

The rules insert new clause (aa) in Rule 2, formally defining an “ineligible director”..

• An “ineligible director” is one who fails to fulfill the requirements stipulated under clauses (a) and (b) of sub-section (2) of Section 10-A of the Banking Regulation Act, 1949.

2. New Procedure for Removal via Drawing of Lots (Rule 5-A)

A comprehensive new rule, 5-A, is introduced to outline the “Manners of determination of drawing of lots” for directors who must cease to hold office or be removed from the Board.

• Ascertainment of Number:

  • The Board of Directors will ascertain the required number of ineligible directors who must cease to hold office for the purpose of the Board’s reconstitution under sub-section (3) of Section 10-A.

  • The Reserve Bank will ascertain the required number of ineligible directors to be removed from the Board’s membership in pursuance of sub-section (5) of Section 10-A..

• Method of Determination: The specific director(s) or person(s) to be removed or cease office will be determined by a drawing of lots from among the pool of ineligible directors.

• Exclusion Procedure for the Draw: To ensure fairness based on tenure, a pre-draw exclusion process is mandated.

  • Names of ineligible directors must first be grouped according to the period for which they have held office.

  • If there are only two groups, the names of directors in the group representing the shorter period of office shall be excluded from the draw.

  • If there are more than two groups, the names of directors in the group representing the shortest period of office shall be excluded.

  • Crucially, this exclusion must not be carried out if it would result in the number of directors remaining for the final draw being more than the determined number required to be removed.

• Authority for the Draw:

  • The draw under Section 10-A(3) is to be conducted by the Board of Directors at a meeting.

  • The draw under Section 10-A(5) by the Reserve Bank will be done by a duly authorised RBI officer, after giving the co-operative bank a reasonable opportunity to nominate its director or officer to be present.

The amendments also introduce major changes to Forms I and IX, which are critical reporting formats for co-operative banks. Furthermore, the existing Rule 11 is omitted..

1. Amendments to FORM I (Reporting)

The changes to Form I—a key regulatory return—aim to standardise reporting periods and update references to banking institutions.

• Standardised Reporting Dates: The use of “First alternate Friday,” “Second alternate Friday,” and “Third alternate Friday” has been replaced. The new standardised reference dates are the “15th day of the month” and the “Last day of the month”, where applicable.

• Updated References to Banking Entities:

  • The words “subsidiary banks and” are omitted from references concerning corresponding new banks.

  • The words “and IDBI Bank limited” are inserted after “corresponding new banks” in Part A, Clause I(a)(i) and Clause III(a).

  • Foot Note 5X updates the reference to include “the National Housing Bank, the Small Industries Bank” in place of the “Industrial Development Bank of India”.

• Standing Deposit Facility (SDF): A new sub-clause (f) is inserted in Clause XIV, mandating the reporting of the “Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme”.

2. Amendments to FORM IX

Form IX is updated to align reporting days and deposit references.

• Reporting Day Consistency: The words “on the last Friday” are replaced with “on the last day of the month” wherever they occur. The generic word “Friday” is also replaced with “day”..

• State Bank of India Reference: Several sub-clauses in Clause B relating to deposits and balances are updated to specifically mention “with the State Bank of India”.

The comprehensive nature of these amendments underscores the government’s commitment to strengthening the governance structure and regulatory oversight of the co-operative banking sector in line with evolving financial standards.

Authority: The Notification was issued under the authority of Section 52 read with clause (zj) of Section 56 of the Banking Regulation Act, 1949, and signed by Shalini Pandit, Joint Secretary.