Reserve Bank of India (Rural Co-operative Banks – Credit Risk Management) Directions, 2025

RBI/DOR/2025-26/305 DOR.CRE.REC.224/07-02-006/2025-26 November 28, 2025 Previous Versions Reserve Bank of India (Rural Co-operative Banks – Credit Risk Management) Directions, 2025 (Updated as on July 01, 2026)

Table of Contents Chapter I - Preliminary Chapter II - Board Approved Policies Chapter II-A – Credit Risk Evaluation Chapter III - Statutory Restrictions Chapter IV - Regulatory Restrictions Chapter V - Valuation of Properties - Empanelment of Valuers Chapter VI - Filing of Security Interest relating to Immovable (other than equitable mortgage), Movable, and Intangible Assets in CERSAI Chapter VIA - Maintenance of Cash Credit Accounts, Current Accounts and Overdraft Accounts by Banks Chapter VII - Repeal and other provisions

Introduction Rural Co-operative Banks (RCBs), in the course of financial intermediation, are exposed to various financial and non-financial risks, of which credit risk is the one of the most significant risks. If not managed effectively, credit risk may have ramifications for a range of other risk categories too. As credit exposures of RCBs encompass varied sectors, borrower types and products with their own idiosyncratic complexities as well as systemic implications due to interconnectedness among themselves, credit risk management of RCBs involve a range of prudential tools, including statutory and regulatory restrictions / prohibitions on certain activities. Recognising this, the Reserve Bank has, from time to time, issued guidelines to strengthen credit risk management practices.

Accordingly, in exercise of the powers conferred by Sections 20, 21 and 35A read with Section 56 of the Banking Regulation Act, 1949; and all other provisions / laws enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this regard, Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues these Directions hereinafter specified.

Chapter I - Preliminary

A. Short title and Commencement

1. These Directions shall be called the Reserve Bank of India (Rural Co-operative Banks – Credit Risk Management) Directions, 2025.
2. These Directions shall come into effect immediately upon issuance.

B. Applicability

3. These Directions shall be applicable to Rural Co-operative Banks (hereinafter collectively referred to as ‘RCBs’ and individually as a ‘RCB’).

In this context, rural co-operative banks shall mean State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs), as defined in the National Bank for Agriculture and Rural Development Act, 1981.

C. Definitions

4. 1[(1) In these Directions, unless the context otherwise requires: (i) 'Cash credit (CC)’ shall mean a facility, under which a customer is allowed an advance up to the credit limit against the security by way of hypothecation / pledge of goods, book debts, standing crops, etc. The facility is a running account and ’Drawing Power – DP’ is periodically determined with reference to the value of the eligible current assets. The outstanding amount is repayable on demand.]

2[(ia) ‘Contract or arrangement’ shall have the same meaning as specified in Section 188(1)(a) to (g) of the Companies Act, 2013. (ib) ‘Control’ shall have the same meaning as assigned to it under Section 2(27) of the Companies Act, 2013.]

3[(ii) ’Current Account’ shall mean a form of demand deposit account wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and shall also be deemed to include other deposit accounts which are neither Savings nor Term deposit account.]

4[(iia) ‘Director of a RCB’ shall have the same meaning as defined in Explanation (b) to Section 20 of the Banking Regulation Act 1949 and would include a nominee director and an independent director (iib) ‘Entity’ shall mean a ‘person’ other than an individual and a Hindu Undivided Family. (iic) ‘Key Managerial Personnel (KMP)’ of a RCB shall mean all employees one level below the Board and any person designated as such by the Board. (iid) ‘Lending’ in the context of a related party shall mean extending funded or/ and non-fund-based credit facilities to related parties. While investments in debt instruments of related parties shall be covered for this purpose, equity investments shall be excluded.]

5[(iii) ‘Overdraft (OD)’ shall mean a facility, under which a customer is allowed to draw an agreed sum (credit limit) in excess of credit balance in their account. The overdraft facility may be secured (against fixed / term deposits and other securities, like small saving instruments, surrender value of insurance policies, etc.) or clean (i.e. without any security). The overdraft facility might be granted on their current account, savings deposits account or temporary overdraft on credit accounts.]

6[(iv) ‘Person’ shall have the same meaning as assigned to it under Section 3 (23) of Part I of Insolvency and Bankruptcy Code (IBC), 2016. (v) ‘Personal Loan’ shall have the same meaning as defined under Banking Statistics (Harmonised Definitions) . (vi) ‘Promoter’ shall have the same meaning as assigned to it under Section 2(69) of the Companies Act, 2013. (vii) ‘Reciprocally Related Person’ means an individual who is either (a) a director (excluding independent director/ nominee director appointed by the Government or RBI or a statutory body) of another Co-operative bank or (b) relatives of such directors or (c) firms/companies in which such reciprocally related persons have interest/substantial interest. (viii) Related Party’ with respect to a RCB shall mean a related person, a reciprocally related person, or any of the following entities: (a) where a related person or a reciprocally related person is a partner, manager, KMP, director or a promoter; or (b) where a related person or a reciprocally related person is a shareholder with more than ten per cent of paid-up equity share capital; or (c) where a related person or a reciprocally related person is having control, whether singly or jointly with another person; or (d) where a related person or a reciprocally related person controls more than twenty per cent of voting rights on account of ownership or through a voting agreement or through any other arrangement; or (e) where a related person or a reciprocally related person has the power to nominate a director to its Board; or (f) which is accustomed to act on the advice, direction, or instruction of a related person or a reciprocally related person; or (g) where a related person or a reciprocally related person is a guarantor or a surety; or (h) where a related person or a reciprocally related person is a trustee or an author or a beneficiary and where the entity is in the form of a private trust; or (i) which is related to the related person or a reciprocally related person as a subsidiary or a parent company or a holding company or an associate or a joint venture. Provided that, nothing in sub-clause (e) above shall apply in cases where the authority to nominate a director arises exclusively from a lending or financing arrangement. Provided further that, nothing in sub-clause (f) above shall apply to the advice, directions or instructions given in a professional capacity. Provided further that, Government of India / State Government-owned or controlled entities shall not be treated as related parties to a government-owned bank just by virtue of the fact that the Government has the common ownership or control of such entities. (ix) ‘Related Person’ with respect to a RCB shall mean a person, and the relatives of such a person, where the person: (a) is either a director, a specified employee or a KMP of the bank; or (b) owns more than five per cent of paid-up equity share capital of the bank or can jointly with other shareholders exercise more than five per cent of the voting rights of the bank on account of either ownership or voting agreement or through shareholders’ agreement or through any other arrangement; or (c) can, through an agreement with the bank, nominate a director to its Board; or (d) is either singly or jointly, in control of the RCB. (x) ‘Relative’ with regard to a natural person shall have the same meaning as defined in Section 2(77) of the Companies Act, 2013 and rules framed therein. (xi) ‘Specified employees’ mean all employees of a RCB who are positioned up to two levels below the Board and any employee designated as such as per the RCB’s policy. (xii) ‘Substantial interest’ shall have the same meaning assigned to it under Clause (ne) of Section 5 of the Banking Regulation Act, 1949.]