Master Direction – Business Authorization for Co-operative Banks (Directions), 2025 - Draft - আরবিআই - Reserve Bank of India
Master Direction – Business Authorization for Co-operative Banks (Directions), 2025 - Draft
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Draft Master Direction RBI/2025-26/ July xx, 2025 Master Direction – Business Authorization for Co-operative Banks (Directions), 2025 In exercise of the powers conferred by Sections 23, 49B and 49C of the Banking Regulation Act, 1949 read with Section 56 thereof and Sections 42(6) and 42(6A) of Reserve Bank of India Act, 1934, the Reserve Bank of India (hereinafter called the Reserve Bank) being satisfied that it is necessary and expedient in the public interest to do so, hereby issues the Directions hereinafter specified. CHAPTER – I: Preliminary 1.1 Short Title These Directions shall be called the Reserve Bank of India (Business Authorization for Co-operative Banks) Directions, 2025. 1.2 Effective Date These Directions shall be applicable from___, 2025. 1.3. Applicability The provisions of this Direction shall apply to all co-operative banks (hereinafter called the ‘banks’), i.e., Primary (Urban) Co-operative Banks (UCBs), State Co-operative banks (StCBs) and District Central Co-operative banks (DCCBs). 2. Definitions (i) In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below –
(ii) All other expressions, unless defined herein, shall have the same meaning as have been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or as used in commercial parlance, as the case may be. CHAPTER – II: General Guidelines 3. Categorization of UCBs for Regulatory Purposes 3.1 Given the heterogeneity in the urban cooperative sector, a four-tiered regulatory framework has been adopted to balance the spirit of mutuality and cooperation more prevalent in banks of smaller sizes and those with limited area of operation vis-à-vis the growth ambitions of the large-sized UCBs to spread their area of operation and undertake more complex business activities. Accordingly, the UCBs are categorized into the following four tiers for regulatory purposes:
3.2 The deposits referred to above shall be reckoned as per the audited balance sheet as of 31 March of the immediately preceding financial year. 3.3 If a UCB transits to a higher Tier on account of an increase in deposits in any year, it can use a glide path of up to a maximum of two years to comply with higher regulatory requirements, if any, of the transited higher Tier. 4. Eligibility Criteria for Business Authorization (ECBA) 4.1 Based on a comprehensive review, it has been decided to replace the Financially Sound and Well Managed (FSWM) norms for UCBs with harmonised eligibility criteria for all banks for certain business authorizations/permissions/approvals. These criteria, as given below, will henceforth be referred to as Eligibility Criteria for Business Authorization (ECBA). Any reference to FSWM criteria in any other circular issued by the Reserve Bank may, henceforth, be considered as a reference to compliance with ECBA. 4.2 A bank will be considered as fully complying with ECBA if it meets the following conditions, based on the audited financial statements as of 31 March of the immediately preceding financial year:
4.3 A bank shall determine its compliance with the ECBA every year based on the audited financial statements as of 31 March of the immediately preceding FY and place it before its Board within 30 days from the date of adoption of the audit report. The Board shall satisfy itself about the compliance of the bank with ECBA and pass the necessary resolution approving the same and inform the Reserve Bank within 15 calendar days from the date of the Board resolution as per the format given in Annex I. A bank not complying with ECBA need not inform the Reserve Bank in this regard. The period of validity of compliance with ECBA will be considered to be till 30 September of next FY, unless the bank is declared non-compliant with ECBA by the supervisor or during the next self-review. 4.4 Example: If a bank determines itself to be in compliance with ECBA in August 2025 based on audited figures as of March 31, 2025, it would be considered compliant with ECBA till September 30, 2026; except in following cases
4.5 The above process is subject to supervisory review. In case during the supervisory review of RBI or NABARD, as the case may be, if a bank, which has declared itself compliant with ECBA based on audited figures, is found to be non-compliant with ECBA based on assessed figures, the bank shall be subject to appropriate supervisory and/or enforcement action and shall be barred from self-reviewing itself as ECBA compliant for a period as deemed fit by the supervisor subject to a minimum of one year from the date of such supervisory review report date. 5. Area of Operation of UCBs 5.1 A UCB may extend its area of operation as follows:
5.2 Constitution of the Board of Management (BoM) shall be a mandatory condition for the expansion of the area of operation for UCBs in Tier 2 and above. UCBs in Tier I may constitute BoM as a good governance practice. 5.3 The byelaws of a UCB must contain a provision that for any revision in the area of operation, except for the area of operations mentioned at Sr. Nos. 5.1 (a) & (b) above, prior approval of the Reserve Bank shall be necessary. Eligible UCBs as at 5.1 (c) & (d) above, desirous of extending their area of operation, shall submit a resolution passed by their general body to this effect and obtain a No Objection Certificate (NOC) from the Reserve Bank. The applicant bank shall submit a suitable rationale for utilisation of the current area of operation and proposed extension of the area of operation while applying for NOC. While considering applications from UCBs for extension of area of operation, the Reserve Bank will give due consideration to system of internal controls, compliance to cyber security guidelines along with IT controls prevailing in the bank and adequate headroom capital. 5.4 After obtaining the NOC, the bank shall get the amended byelaws registered with the Registrar of Co-operative Societies (RCS)/Central Registrar of Co-operative Societies (CRCS). The validity of the NOC granted by the Reserve Bank will be for 180 calendar days. 5.5 The UCB shall approach the Reserve Bank within 15 calendar days of getting byelaws registered with RCS/CRCS (along with a copy of the approval), for obtaining a revised authorization. It may be noted that the amendment in byelaws should be in consonance with the NOC granted by the Reserve Bank, wherever applicable. 5.6 The change in area of operation of a UCB due to splitting/ reorganisation of districts would be automatic and would not require prior approval from the Reserve Bank. Such UCBs shall get the amended byelaws registered with RCS/ CRCS and then approach the Reserve Bank as per process given in paragraph 5.5 above. 6. Area of Operation of DCCBs & StCBs 6.1 The area of operation of DCCBs is decided by the state government concerned by passing an order to that effect. Any change in the extant area of operation that takes place due to the splitting/ reorganisation of districts is also notified by the government by issuing an order to that effect. Therefore, DCCBs desirous of amending their area of operation shall approach the Reserve Bank along with the notification from the state government and a resolution passed to this effect by their Board in line with the process in para 5.3 above. Thereafter, the DCCB may follow the process given in paragraphs 5.4 and 5.5 above. 6.2 The process pertaining to DCCBs in para 6.1 shall be applicable to StCBs as well. CHAPTER – III: Guidelines for Business Authorization 7. Opening of a New Place of Business 7.1 Prior permission from the Reserve Bank is required for opening a new place of business including Branches, Extension Counters, ATMs, Controlling Offices (Regional/ Zonal/Administrative Office), Central Processing Centres, Regional Collection Centres, Retail Asset Processing Centres, Service Branches, Back Offices etc. or for changing the location of any existing place of business under Section 23 of the BR Act, 1949 read with Section 56 thereof. Opening a new place of business without valid authorization from the Reserve Bank, unless otherwise permitted by the Reserve Bank, is a violation of the said Act and is liable for penal action. The reporting of opening a new place of business shall be as per procedure given in para 14 of this Master Direction. 7.2 The bank should ensure that there are no restrictions imposed by the local development or other authorities for setting up a commercial establishment in the locality where the new place of business is proposed to be opened. It is incumbent upon the bank to ensure that its branches are operating from premises that have a valid lease agreement and are free of any dispute between the bank and the landlords of the premises in question. 7.3 The conditions for opening of a new place of business are as under:
7.4 Opening of a branch under Automatic Route a) A bank is eligible to open a branch in its area of operation (including the upgradation of an extension counter that is in operation for more than three years) under the automatic route subject to the following conditions:
b) The eligible UCBs are permitted to open new branches up to 10 per cent of the number of full-fledged branches (at the end of the previous financial year) in a financial year, subject to a maximum of five branches without having the need to take permission from Reserve Bank of India. However, if the total number of full-fledged branches (at the end of the previous financial year) is less than 10, the bank will be eligible to open at least one branch. c) The bank shall put in place a policy for opening branches, approved by its Board of Directors. While formulating the said policy, the bank shall bear in mind its financial health, viability of the proposed branches and bank’s ability to render satisfactory customer service. The Policy must be reviewed periodically to keep it aligned with the evolving banking landscape and revision, if any, in Reserve Bank guidelines. Further, the bank shall ensure that the proposal for opening of such branches in a particular financial year, based on their policy, is duly approved by their Board of Directors. 7.5 Opening of a branch under Prior Approval Route a) UCBs desirous of opening of branches of more than 10% allowed under automatic route, SEBs and RCBs, in compliance with ECBA, may apply for opening branches under the Prior Approval Route by submission of a single Annual Business Plan (ABP) (format given in Annex II) in a financial year, along with application as per Form V of the Banking Regulation (Co-operative Societies) Rules, 1966. The bank shall have a policy as at 7.4 (c). b) ABP for a financial year, should be submitted by the bank well in advance before the start of financial year. The Reserve Bank will process and convey the decision within 90 calendar days of receipt of the complete ABP from the bank. The approval granted by the Reserve Bank for opening the branch will be valid till March 31st of concerned financial year, by which time the branch must be operationalised, or else the approval will lapse automatically. c) The permission for opening of a branch will be strictly in the order of preference given by the bank. No request for change would be entertained thereafter. Non-operationalisation of at least 75% of approved branches within the concerned financial year would be viewed seriously and may impact the approvals in future, including debarment from opening new branches for the next two years. 7.6 Additional Conditions for Salary Earners' Bank for Opening a Branch Salary Earners' Bank shall comply with the following additional criteria before applying to open branches under ABP: a) The byelaws should not contain provision for giving loans to outsiders (i.e. persons who are/were not employees of the institution) by enrolling them as members/ nominal members; b) There should at least be 1000 members at a place where the SEB desires to open a branch. 7.7 Additional Conditions for StCB for Opening a Branch a) In a three-tier structure consisting of StCB at the apex level, District Central Co-operative Bank (DCCB) at the intermediate level and Primary Agricultural Credit Society (PACS) at the ground level, StCB will normally be allowed to open branch/ extension counter in state capital only. In case a branch is required in district headquarters, the bank may open a branch only for maintaining and servicing deposits of co-operative banks. In semi-urban/ rural areas, where DCCB is non-existent, weak or virtually defunct, StCB may be allowed to open a branch, provided the DCCB in the adjoining district is not in a position to extend its area of operation to cover the area (where DCCB is non-existent in the concerned district) or to take over the weak/defunct DCCB through merger. Such StCB shall clearly justify the reasons for opening each branch/ extension counter while applying under ABP. In a two-tier co-operative credit structure consisting of StCB and PACS, StCB may open branch/ extension counters in urban as well as rural areas. However, the StCB shall also clearly justify the reasons for opening each branch/ extension counter while applying under ABP. In all such cases, the recommendations of the RCS of the state will be required. b) StCBs registered in the north-eastern states are permitted to open/shift branches/ ECs anywhere in their area of operation, so long as they continue to function as the central financing agency extending the area of operation to the entire state. 7.8 Opening of an Extension Counter (EC) 7.8.1 An EC may be opened within the premises of educational institutions, big offices, factories and hospitals of which the co-operative bank concerned is the principal banker. The bank may submit a declaration from the institution in which it proposes to open EC in the format as per Annex IV. Request from other bankers to such entities may be considered only if the opening of an EC is not considered feasible by the principal banker and/or its base branch is beyond 10 kilometres from the proposed EC after obtaining written consent from the principal banker. An EC may also be opened in the residential colonies provided no other branch/ EC is already existing in the colony and no restrictions have been imposed by the local development or any other authorities for setting up a commercial establishment in the residential colony/ locality. No extension counter should be opened in a marketplace, shopping centre, etc. Only one EC is permitted within a premise. 7.8.2 Base branch of the bank to which the proposed EC is linked should be within a distance of 10 kilometres to facilitate incorporation of transactions of EC in the accounts of the base branch on a day-to-day basis. 7.8.3 While opening an EC, the bank should take into account important factors such as need, viability and overall merits of opening the EC, including the bank’s ability to deploy adequate internal controls. 7.8.5 The facilities at an EC should be restricted to:
7.9 Operationalisation of an ATM/ CDMs/ CRMs A bank may offer all its products and services through the ATM channels, provided the technology permits and adequate checks are put in place. The business transacted at the ATM shall be recorded in the books of the respective base branch/Centralised Data Centre. Third-party advertisement on the ATM screens, such as the display of products of other manufacturers/dealers/vendors, is not permitted. However, the bank may utilize the ATM screens to display their own products. These guidelines shall also be applicable to CDMs and CRMs. 8. Shifting of a Place of Business 8.1 A bank is permitted to shift its branches, extension counters, offices {as discussed in paras 7.3 (d) and (e)} within the same city or town without prior approval of the Reserve Bank. The shifting of an EC will be subject to the distance of the proposed location being within 10 kilometres from the base branch. 8.2 The decision to shift a place of business shall be taken by the Board after taking into account all the relevant factors, including viability, and should be properly recorded/ minuted in the proceedings of the Board meeting. 8.3 Proper notice should be given to all existing depositors/ clients of the branch/ EC through SMS/public notice/letters at least one month in advance of shifting. 8.4 A bank may shift its off-site ATMs in its area of operation without prior approval of the Reserve Bank. 8.5 Closing a branch/ EC in one city/ town and opening in another will not be deemed as shifting. However, a bank may shift its office {as discussed in paras 7.3 (d) and (e)}, except Head Office, from one town/ city to another within its area of operation, without prior approval of the Reserve Bank. 8.6 Splitting of a branch or part shifting of some of the departments of the parent office/ branch can be made to a nearby location within the same locality / municipal ward due to space constraints and for better customer service or for convenience of the members without prior permission of the Reserve Bank, subject to the condition that there is no overlap in business conducted from both the premises. 9. Closure of a Place of Business A bank is allowed to close its branches/ extension counters/ ATMs/ offices {as discussed in paras 7.3 (d) and (e)}, except the Head Office, without prior approval of the Reserve Bank. Closure of a branch/ extension counter shall be subject to the following conditions:
10. Doorstep Banking Services 10.1 A bank may provide Doorstep Banking Services to its customers on a voluntary basis, without prior approval of the Reserve Bank. 10.2 The bank may formulate a scheme for providing Doorstep Banking Services to its customers, with the approval of their Boards, in accordance with the guidelines provided in Annex V. The details of the scheme may be informed to the Reserve Bank within 15 calendar days of implementing the scheme. 10.3 The bank shall take into account the various risks that may arise on account of offering Doorstep Banking Services, such as outsourcing risk, operational risk, reputational risk, etc., to customers either directly through its own employees or through agents and take all necessary steps to manage the same. 10.4 The operation of the scheme may be reviewed by the Board of the bank on an annual basis. 11. Shifting, Acquisition, Surrender of Leased Premises, etc. of UCBs not complying with Section 11(1) of BR Act, 1949 (AACS) 11.1 A UCB not complying with provisions of section 11 (1) of the Banking Regulation Act, 1949 (AACS) is required to obtain prior approval of the Reserve Bank for:
11.2 Such a bank is required to submit an application in the enclosed format given in Annex VII to the Regional Office concerned of the Reserve Bank. The bank should not enter into any firm commitment to the acquisition of premises for shifting an office thereat until the Reserve Bank's prior approval has been obtained. Therefore, if a bank has inadvertently made any such commitment, it should, in its own interest, take steps to cancel or nullify it. Reserve Bank will not consider any request for reconsidering its decision in such cases on the grounds that the bank has already acquired the premises or entered into an agreement for the same. 12. Display and Change in Name of a Co-operative Bank 12.1 Displaying the Name of a Co-operative Bank 12.1.1 A bank should generally display its full name in any stationery item, publicity material, website, mobile application, advertisement, name board, etc., and the same must conform to the name as it appears in the Certificate of Registration granted by the RCS and the banking licence granted by the Reserve Bank. 12.1.2 While the use of abbreviation/abridged name/logo, etc., is permitted as part of the building effort of the bank, it must be ensured that the full name as appearing in the banking licence is also shown along with such abbreviated/abridged name/logo in all publicity material/stationery. Besides, the font size used for the full name shall not be smaller than the one used for the abbreviated name/abridged name/logo. The words "co-operative bank", indicating the nature of the bank, must be prominently displayed in the full name/ abbreviation/abridged name/logo of the bank in equal fonts. Any contravention or non-compliance to the same will attract penalties and enforcement action. 12.2 Change in Name of a Co-operative Bank 12.2.1 A bank desirous of change in its name shall approach the Regional Office concerned of the Reserve Bank of India for the grant of no objection certificate (NOC) under Sections 49B and 49C of the Banking Regulation Act, 1949 (‘BR Act’), clearly stating the reason/s for such change (as per format given in Annex VIII). The Resolution of the General Body of the bank shall be mandatory at the time of submitting such requests. It may be noted that the Reserve Bank shall have the discretion to assess whether the reason/s submitted by the bank are valid and compelling. 12.2.2 After obtaining NOC from the Reserve Bank, the bank shall approach the Central Registrar of Co-operative Societies (CRCS) or Registrar of Co-operative Societies (RCS), as applicable, for amendment in its byelaws. Once the approval is obtained from CRCS/ RCS, the bank shall apply to the Regional Office concerned of the Reserve Bank with a copy of the Certificate of Registration issued by CRCS/ RCS, having the amended name for obtaining a revised banking license. 12.2.3 The bank shall follow the above process for change in the name even if the name change is due to any Government notification. No bank shall display/operate with amended name without effecting the corresponding change in its name in the banking license issued by the Reserve Bank. Further, the displayed name of the bank shall be strictly as per the name mentioned in its banking license. 13. Norms for inclusion of a UCB and a StCB in the Second Schedule to the Reserve Bank of India Act, 1934 13.1 In terms of clause (a) of sub-section (6) of section 42 of the Reserve Bank of India Act, 1934 and the Government of India notification F.No.3/16/2023-AC dated September 04, 2023 (published in Gazette of India on September 23, 2023), the licensed UCBs (except Salary Earners’ Banks) and StCBs, which are in compliance with ECBA and the following additional norms, may apply to the Regional Office concerned of the Reserve Bank for inclusion in the Second Schedule to the Reserve Bank of India Act, 1934:
13.2 The above information shall be based on the assessed financials and findings of the RBI/ NABARD inspection report or audited financial statements, whichever is the latest. A StCB shall submit a copy to the NABARD, which in turn shall forward it to the Regional Office of the Reserve Bank, along with its comments and recommendation in terms of sub-section (6A) of section 42 of the Reserve Bank of India Act, 1934. An eligible StCB/ UCB shall submit its application with the following documents:
CHAPTER – IV: Reporting 14.1 Proforma and Reporting of Bank / Branch Details under the Central Information System for Banking Infrastructure (CISBI) 14.1.1 The CISBI portal (https://cisbi.rbi.org.in) has been web-deployed by the Reserve Bank. Under this system, all cooperative banks are required to submit their information in a single Proforma (Annex I of CISBI) online on the CISBI portal. The instructions for submission of Proforma online are given in Annex II of CISBI. The CISBI portal contains the relevant circulars, user manuals and other relevant documents to facilitate reporting. 14.1.2 The Reserve Bank has provided login credentials to Nodal Officers of banks for submitting their information in CISBI. Access to CISBI can also be sought by making an e-mail request at cisbi@rbi.org.in. Co-operative banks should submit information on the CISBI portal as per guidelines given in Annex VI, and thereafter, bank branch/office / NAIO / CSP codes would be allotted by CISBI after due validations. In case of status change, banks need to edit only the relevant part. All cooperative banks should submit immediately and, in any case, not later than seven calendar days, the information relating to the opening, closure, merger, shifting and conversion of bank branches/offices / NAIOs / CSPs online through the CISBI portal. 14.1.3 Further, in order to ensure the correctness of data on CISBI, in the last week of every month, banks shall generate a 'NIL Report' in CISBI for the position as on last day of the previous month, indicating the total number of functioning branches, offices, NAIOs, CSPs; and submit it through CISBI after authenticating its correctness. Banks can also use the facility to access/download the data related to them. 14.1.4 It is further advised that CISBI also has a provision to maintain complete bank-level details (e.g. bank category, bank group, bank code, type of license issued, registration details, area of operation, addresses of offices, contact details of senior officials, etc.) and history of all the changes with a time stamp. After gaining first-time access to the system, banks shall ensure to submit correct and updated bank-level information in all the fields where submission/updation rights are available with the bank. After the initial submission of information on the CISBI portal, a one-time confirmation stating that "correct and updated Bank level information has been submitted on CISBI" shall be sent by banks to the Department of Supervision, Regional Office concerned of the Reserve Bank. Any subsequent changes in the bank-level information shall be submitted for updation on the CISBI portal on an immediate basis by the banks. The banks shall enter the complete and clear (without abbreviations) particulars on the Banking Channel Name, Address, geotagging, etc. 14.2 Reporting Timeline: Reporting on the CISBI portal within the prescribed time of seven calendar days, as given in para 13.2 above, shall be ensured by the bank. In cases where prior approval of the Reserve Bank is not required for any authorisation in terms of these Directions, the bank shall report to the Reserve Bank within 15 calendar days (reporting format given in Annex III). Non-receipt of information/ particulars within the prescribed time or furnishing of incorrect/ partial information by the bank (including reporting on the CISBI portal) would be viewed seriously and the bank would be liable for penal action, including debarment from opening a new place of business for the next three years. 15. Point of contact for application/ submission of information: The point of contact for all matters related to this Direction shall be as under:
Note: Banks shall submit their applications to the Reserve Bank using relevant application forms in the PRAVAAH portal (https://pravaah.rbi.org.in). Appendix List of Circulars Repealed
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