Reserve Bank of India (Urban Co-operative Banks - Compliance Function) Directions, 2026
RBI master-direction RBI/DoS/2026-27/435 · 31 Jul 2026
RBI master-direction RBI/DoS/2026-27/435 · 31 Jul 2026
Summary
Check the official recordThe Reserve Bank of India establishes minimum standards for the compliance function in Urban Co-operative Banks (UCBs). The directions mandate a governance framework involving the Board and senior management to manage compliance risk. UCBs in Tier 3 and Tier 4 must appoint a Chief Compliance Officer (CCO) with independent authority and direct reporting lines to the Board or Managing Director. UCBs in Tier 1 and Tier 2 must designate a Compliance Officer. The policy requires UCBs to implement enterprise-wide technology solutions for monitoring compliance. These directions apply immediately. UCBs in Tier 3 and Tier 4 receive a six-month transition period if they exit All Inclusive Directions. The regulation replaces previous compliance guidelines for UCBs.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
RBI/DoS/2026-27/435 DoS.CO.PPG.29/11.01.005/2026-27 July 31, 2026
Introduction Chapter I - Preliminary A. Short Title and Commencement B. Applicability C. Definitions Chapter II - Governance and Oversight A. Role of the Board B. Role of the Senior Management C. Compliance Policy Chapter III - Scope, Structure, and Responsibilities A. Scope B. Structure C. Staffing D. Roles and Responsibilities E. Internal Audit Chapter IV - Chief Compliance Officer A. Appointment B. Authority, Stature, and Independence C. Reporting Requirements D. Roles and Responsibilities Chapter V – Compliance Officer A. Designation B. Roles and Responsibilities Chapter VI - Use of Technology for Monitoring Chapter VII - Repeal and Other Provisions A. Repeal and Saving B. Application of Other Laws Not barred C. Interpretations
The Compliance function is a critical element of the corporate governance framework of an Urban Co-operative Bank. The provisions set out in these Directions represent minimum standards, based on the principle of proportionality, and the Urban Co-operative Bank shall structure its compliance framework in line with its governance arrangements, scale of operations, risk profile, and organisational structure.
In exercise of the powers conferred by Section 35-A read with Section 56 of the Banking Regulation Act, 1949, 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 Directions hereinafter specified.
These Directions shall be called the Reserve Bank of India (Urban Co-operative Banks - Compliance Function) Directions, 2026.
These Directions shall come into effect immediately upon issuance.
For the purpose of these Directions, ‘Urban Co-operative Banks’ shall mean Primary Co-operative Banks as defined under Section 5(ccv) as applicable to co-operative societies, read with Section 56 of Banking Regulation Act, 1949.
Provided that Chapter II, III, IV and VI of these Directions shall be applicable only to UCBs in Tier 3 and Tier 4, except those under All Inclusive Directions, while Chapter V of these Directions shall be applicable only to UCBs in Tier 1 and Tier 2.
Provided that a transition time of six months will be provided to UCBs in Tier 3 and Tier 4, for ensuring compliance with these Directions, as and when they come out of All Inclusive Directions.
Note: The applicability under these Directions is in line with the regulatory structure for UCBs as set out in Reserve Bank of India (Urban Co-operative Banks – Licensing, Scheduling and Regulatory Classification) Guidelines, 2025.
The Board-approved Compliance policy shall clearly spell out its compliance philosophy, expectations on compliance culture, structure, and role of the Compliance function, the role of Chief Compliance Officer (CCO), processes for identifying, assessing, monitoring, managing and reporting on compliance risk. The policy shall be reviewed at least once a year.
The policy shall ensure coverage of the following aspects:
The CCO shall head the Compliance Department, meeting the requirements prescribed under Chapter IV of these Directions. The UCB is free to adopt its own organisational structure for the Compliance function. However, the function shall be independent and sufficiently resourced, its responsibilities shall be clearly specified, and its activities shall be subject to periodic and independent review.
In case of UCBs having separate Departments / divisions looking after compliance with different statutory and other requirements, the Departments concerned shall hold the prime responsibility for their respective areas, which shall be clearly outlined. Adherence to applicable statutory provisions and regulations is the responsibility of each staff member. However, Compliance Function would need to ensure overall oversight.
The staff in the Compliance Department shall primarily focus on Compliance function. However, the UCB may assign some other duties to the Compliance staff while ensuring that there is no conflict of interest.
Apart from having staff with basic qualifications and practical experience in business lines / audit & inspection functions, Compliance function shall have adequate staff members with knowledge of statutory / regulatory prescriptions, law, accountancy, risk management, and information technology. The UCB shall ensure appropriate succession planning to avoid any future skill gap.