Reserve Bank of India (Urban Co-operative Banks - Miscellaneous) Supervisory Directions, 2026

RBI/DoS/2026-27/443 DoS.CO.PPG.37/11.01.005/2026-27 July 31, 2026 c

Table of Contents

Chapter I - Preliminary

A. Short Title and Commencement

B. Applicability

C. Definitions

Chapter II - Core Banking Solution Implementation

Chapter III - Prompt Corrective Action Framework

Chapter IV - Fair Practices Code - Charging of Interest

Chapter V - Nomination Facility

Chapter VI - Fraud Prevention Measures

A. Co-ordination among various agencies

B. Legal and administrative measures

C. Precautions and Safeguards

C.1 Cash and valuables

C.2 Negotiable Instruments

C.3 Books of Accounts

C.4 Immovable Property and Stationery

C.5 Computerised Branches

D. Insurance

E. Snap Inspections

F. Other Instructions

Chapter VII - Vigilance

Chapter VIII - Repeal and Other Provisions

A. Repeal and Saving

B. Application of Other Laws Not Barred

C. Interpretations

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.

Chapter I - Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Urban Co-operative Banks - Miscellaneous) Supervisory Directions, 2026.

2. These Directions shall come into effect immediately upon issuance.

B. Applicability

3. These Directions shall be applicable to Urban Co-operative Banks (hereinafter collectively referred to as ‘UCBs’ and individually as ‘UCB’).

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 the Banking Regulation Act, 1949.

Provided that Chapter III of these Directions shall be applicable to UCBs in Tier 2, Tier 3 and Tier 4 categories except those under All Inclusive Directions (AID). Tier 1 UCBs, though not covered under the provisions of Chapter III of these Directions, shall be subject to enhanced monitoring under the extant supervisory framework. UCBs under AID shall continue to be monitored as hitherto including with respect to the conditions under AID. A suitable transition time shall be provided to such UCBs for compliance with the provisions of Chapter III of these Directions, as and when they come out of AID.

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.

C. Definitions

4. All expressions used in these Directions, shall have the same meaning as have been assigned to them under the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the Companies Act, 2013, or any statutory modification or re-enactment thereto or other regulations issued by RBI or the Glossary of Terms published by RBI or as used in commercial parlance, as the case may be.

Chapter II - Core Banking Solution Implementation

5. The UCB shall implement Core Banking Solution (CBS) in all its branches, progress of which may be informed to the Senior Supervisory Manager (SSM), RBI.

6. For this purpose, the UCB may refer to the document - ‘Core Banking Solution Requirements for Urban Cooperative Banks: Functional and Technical’ dealing with the functional and technical requirements for Core Banking Solution in UCBs prepared by the Institute for Development and Research in Banking Technology in consultation with RBI.

Chapter III - Prompt Corrective Action Framework

7. The objective of the Prompt Corrective Action (PCA) Framework is to enable supervisory intervention at an appropriate time and require the UCBs to initiate and implement remedial measures in a timely manner, to restore their financial health. The PCA Framework does not preclude RBI from taking any other action as it deems fit at any time, in addition to the corrective actions prescribed in the Framework.

8. Capital, Asset Quality and Profitability will be the key areas for monitoring in the PCA Framework. Indicators to be tracked for Capital, Asset Quality and Profitability would be Capital to Risk-weighted Assets Ratio (CRAR), Net Non-Performing Assets (NNPA) Ratio (percentage of net NPA to net advances) and net profit, respectively. Breach of any of the following risk threshold may result in invocation of PCA:

PCA Matrix - Parameters, Indicators and Risk Thresholds

* For Tier 2 to 4 UCBs as per the glide path provided for achieving the regulatory minimum CRAR of 12 per cent by March 31, 2026.

9. A UCB will generally be placed under PCA Framework based on the Reported / Audited Annual Financial Results and / or the ongoing Supervisory Assessment made by RBI. However, RBI may impose PCA on any UCB during the course of a year (including migration from one threshold to another) in case the circumstances so warrant. Although supervisory action taken will primarily be based on the criteria specified under the PCA Framework, RBI will not be precluded from taking appropriate supervisory action in case stress is noticed in other important indicators / parameters or in case of serious governance issues. Also, RBI will not be precluded from taking any supervisory action other than those indicated in under PCA Framework, based on the merits of each case.

10. Once a UCB is placed under PCA, taking the UCB out of PCA Framework and / or withdrawal of restrictions imposed under the PCA Framework will be considered:

• (1) if no breaches in risk thresholds in any of the parameters are observed as per four continuous quarterly financial statements, one of which should be Audited Annual Financial Statement (subject to assessment by RBI); and
• (2) based on supervisory comfort of RBI, including an assessment on sustainable improvement in key financials of the UCB.

11. When a UCB is placed under PCA, one or more of the following corrective actions may be prescribed:

Mandatory and Discretionary Actions

Restriction on declaration / payment of dividend / donation

Appropriate restrictions on capital expenditure, other than for technological upgradation | Common menu - Actions pertaining to:

Special Supervisory Actions Strategy related Governance related Capital related Credit risk related Market risk related HR related Profitability related Operations / Business related Imposition of All Inclusive Directions / Cancellation of Banking License Any other | | Risk Threshold 2 | In addition to mandatory actions of Threshold 1,

Restriction on branch expansion | | | Risk Threshold 3 | In addition to mandatory actions of Thresholds 1 & 2,

Appropriate restrictions/ prohibition on expansion of total size of the deposits | |

12. Details on the common menu for selection of Discretionary Corrective Actions are as hereunder:

(1) Special Supervisory Actions

• (i) Special Supervisory Monitoring Meetings at quarterly or other identified frequency.
• (ii) Special inspections / targeted scrutiny of the UCB.
• (iii) Cause a special and / or additional audit of the UCB under the extant supervisory mechanism and / or through external auditors.
• (iv) Resolution of the UCB by Amalgamation or Reconstruction [Reference: Section 45 of the Banking Regulation Act 1949 (BR Act)].