Reserve Bank of India (Rural Co-operative Banks - Voluntary Amalgamation) Directions, 2025 · RBI/DoR/2025-26/295
RBI master-direction RBI/DoR/2025-26/295 · 28 Nov 2025
RBI master-direction RBI/DoR/2025-26/295 · 28 Nov 2025
Summary
Check the official recordThe Reserve Bank of India establishes a framework for the voluntary amalgamation of Rural Co-operative Banks. This applies to State Co-operative Banks and Central Co-operative Banks. The process requires a two-stage approval from the Reserve Bank of India in consultation with the National Bank for Agriculture and Rural Development. Banks must obtain shareholder approval at a General Body Meeting. The State Government must submit proposals through the PRAVAAH portal. The amalgamated entity must meet specific financial, governance, and IT integration criteria. The amalgamating entity must manage branch licensing, deposit interest rate adjustments, and board constitution post-amalgamation. These directions replace previous guidelines on voluntary amalgamation for these banks.
What you must do
Key dates
Who is affected
Thresholds
If you do not comply
RBI/DoR/2025-26/295 DoR.HOL.REC.214/16-13-100/2025-26 November 28, 2025
Reserve Bank of India (Rural Co-operative Banks - Voluntary Amalgamation) Directions, 2025
Table of Contents Chapter I - Preliminary A. Short Title and Commencement B. Applicability C. Definitions D. Scope Chapter II – Approval by Shareholders Chapter III – Approval by RBI Chapter IV – Implementation of Scheme of Amalgamation Chapter V – Repeal and Other Provisions A. Repeal and saving B. Application of other laws not barred C. Interpretations Annex
In exercise of the powers conferred by Section 44A and Section 35A of the Banking Regulation Act, 1949, as amended vide Banking Regulation (Amendment) Act 2020 (39 of 2020), read with Section 56 thereof; and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.
In this context, rural co-operative banks shall mean State Co-operative Banks (collectively referred to as ‘StCBs’ and individually as an ‘StCB’) and Central Co-operative Banks (collectively referred to as ‘DCCBs’ and individually as a ‘DCCB’), as defined in the National Bank for Agriculture and Rural Development Act, 1981.
In these directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below: (1) ‘Amalgamated Entity’ means the entity which is proposed to transfer its business to another entity under the scheme of amalgamation. (2) ‘Amalgamating Entity’ means the entity which is to acquire the business of the amalgamated entity under the scheme of amalgamation. (3) ‘Amalgamation’ refers to one or more entities merging with another entity under the relevant statutes / regulations through a scheme of amalgamation (or whatever name called), which sets out the terms and modalities of the process.
All other expressions, unless defined herein, shall have the same meaning as have been assigned to them under the Reserve Bank of India Act, 1934, or the Banking Regulation Act, 1949, or the National Bank for Agriculture and Rural Development Act, 1981, or any statutory modification or re-enactment thereto, or Glossary of Terms published by the RBI, or as used in commercial parlance, as the case may be.
The draft scheme of amalgamation shall be approved by two-third of the majority of the shareholders, both in number and value, present and voting at a General Body Meeting of each bank concerned, in accordance with the provisions of Section 44A read with Section 56 of the BR Act, 1949.
The notices of every meeting of the shareholders called for approving the draft scheme of amalgamation shall be published in newspapers at least once a week for three consecutive weeks in not less than two newspapers circulating in the locality or localities where the registered offices of the banks are situated, and one of the newspapers shall be in a language commonly understood in the locality or localities.
(1) In the first stage, an ‘in-principle’ approval will be given, after consideration of the proposal and supporting documents submitted by the State Government [through PRAVAAH portal (https://pravaah.rbi.org.in)], subject to fulfilment of eligibility conditions, regulatory criteria, and general considerations set out as under:
(i) Eligibility Conditions (a) The State Government of the State shall make a proposal for amalgamation after conducting a detailed study of the legal framework, along with a strategy for additional capital infusion, assurance regarding financial support if required, a projected business model with clear profitability and the proposed governance model for the amalgamated bank. (b) The proposal of the State Government should have been examined and recommended by NABARD before submission to RBI. (c) The scheme of amalgamation shall be approved by the requisite majority of shareholders of the respective banks as set out in paragraph 7 of these Directions.
(ii) Regulatory Criteria (a) The proposal shall be in compliance with the legal requirements and past orders or rulings of the Courts, if any. The State Government shall also verify that there are no Court Orders prohibiting or staying the proposal for amalgamation. (b) The financial parameters of the entity post-amalgamation, based on notionally consolidated latest audited financial statements, shall be robust. The entity shall have CRAR above the prescribed regulatory minimum, Gross NPA below seven percent and Net NPA below five percent, along with adequate liquid assets. Post-amalgamation, it shall be a profit making and financially viable entity on a sustained basis. (c) The amalgamating entity shall have a satisfactory track record of regulatory and supervisory compliance. (d) The amalgamating entity shall have strong governance / management practices.
(iii) General Considerations (a) An MOU shall be executed by the constituents i.e., the amalgamated DCCB(s), the amalgamating entity (StCB or another DCCB, as applicable) and the State Government covering issues of governance structure, management, manpower / HR issues and the manner of arriving at the share swap ratio based on the net worth of the amalgamated entities. The net worth of both the amalgamated and amalgamating entities shall be computed in accordance with the guidelines contained in Reserve Bank of India (Rural Co-operative Banks – Miscellaneous) Directions, 2025 and other regulatory guidelines as may be applicable. (b) Due diligence on the amalgamated entities shall be carried out by Chartered Accountants. Shares in the amalgamating entity shall be allotted on the basis of the net worth of the amalgamated entities. Share swap ratios for allotment of shares shall be determined based on the valuation of assets and liabilities conducted by a chartered accountant firm registered with Insolvency and Bankruptcy Board of India (IBBI) as valuers. (c) If, as a result of share swap ratio based on net worth, shareholders of some DCCBs cannot be allotted any shares, the State Government shall infuse sufficient capital in such DCCBs to ensure that the shareholders of such DCCBs are allotted at least one share each. (d) In addition to compliance with extant income recognition, asset classification and provisioning norms, full provision shall be made for impairment of assets, if any, arising from frauds, misappropriation etc., while arriving at the value of net assets of the entities under amalgamation. (e) The amalgamating entity, post-amalgamation, shall be required to adhere to the CRAR norms prescribed by RBI from time to time. Any shortfall in capital required to meet the CRAR requirement shall be met by the State Government on an ongoing basis. (f) The amalgamating entity, post-amalgamation, shall meet with the regulatory requirements laid down for grant of various permissions / approvals given to the amalgamated entities so that none of the services currently extended by the entities under amalgamation get jeopardised. The required regulatory approvals for the said services shall be obtained before the entity commences operations post-amalgamation. In case the amalgamating entity is not eligible to continue with certain lines of business which the amalgamated entities have been permitted, such lines of business shall be phased out non-disruptively within one year of grant of final approval. (g) The amalgamating entity shall ensure that its IT system is appropriately configured to enable seamless integration with the IT systems of all entities under amalgamation before applying for final approval. A migration audit of the IT systems of all amalgamated entities shall be completed prior to amalgamation. System integrity shall be established and certified before the entities under amalgamation can migrate onto the platform of the amalgamating entity. (h) A new Board of the post-amalgamation entity shall be constituted within three months of amalgamation. The MD / CEO who is to be appointed shall meet the ‘Fit & Proper criteria’ prescribed by RBI. (i) In addition to the Board of Directors, a ‘Board of Management’ (BoM) shall be set up for the post-amalgamation entity within three months of amalgamation, in accordance with the provisions of the Reserve Bank of India (Urban Co-operative Banks – Governance) Directions, 2025. For this purpose, the bye-laws of the amalgamating entity shall be amended to incorporate the provisions relating to the BoM as prescribed by RBI. (j) In case of divergence in interest rates offered on deposits by the amalgamating entity and the amalgamated entities, the amalgamating entity shall provide a sufficient notice period to the depositors of the amalgamated entities to enable them to decide whether to continue their deposits. Depositors opting to discontinue their deposits within the aforesaid period shall not be levied any penalty for such premature withdrawal. (k) Proposals for amalgamation that meet the indicative benchmarks shall be evaluated by NABARD and RBI on merit and may be subject to such additional conditions or requirements that may be deemed necessary.