Parliament Question: Centralization of Cooperatives

GOVERNMENT OF INDIA MINISTRY OF COOPERATION LOK SABHA UNSTARRED QUESTION NO. 5235 TO BE ANSWERED ON 24th MARCH, 2026 Centralization of Cooperatives

5235. Ms. S Jothimani:

Shri Sachithanantham R:

Will the Minister of COOPERATION (सहकारिता मंत्री) be pleased to state:

(a) whether cooperation is a subject listed under the State List of the Constitution;

(b) whether the Government is aware of growing concerns among State Government and cooperative bodies over increasing centralization in the cooperative sector, which falls under the State List as per Entry 32 of the Seventh Schedule of the Constitution;

(c) whether the creation of central bodies such as the Ministry of Cooperation, the proposed National Cooperative Policy, cooperative schemes and national-level institutions is being done in consultation with State Governments, and if so, the details of such consultations;

(d) whether the Government plans to safeguard the federal spirit of cooperative governance and ensure that state-level cooperative autonomy is not undermined;

(e) whether there is a roadmap to promote and strengthen existing state-level cooperative training, education and financial institutions instead of creating overlapping central structures, if so, the details thereof; and

(f) the steps taken to address the concerns of States like Tamil Nadu, Kerala and Maharashtra, which have historically strong and autonomous cooperative movements? ANSWER THE MINISTER OF COOPERATION सहकारिता मंत्री (SHRI AMIT SHAH)

(a): Cooperative societies that operate within a single State and are registered under the State- level Cooperative Act fall under the jurisdiction of the respective State Governments under Entry 32 of the State List. Cooperative societies whose primary object are to serve the interests of members in more than one State are registered under the Multi-State Cooperative Societies Act, 2002 (as amended from time to time), and fall under the jurisdiction of the Central Government under Entry 44 of the Union List of the Seventh Schedule.

(b): No such concerns has been received by the Ministry.(c) & (d): The Ministry of Cooperation, since its formation in July 2021, has been functioning with the spirit of Cooperative Federalism and within its mandated constitutional jurisdiction as defined in the Union List, without any encroachment on the autonomy of state cooperatives and their democratic functioning. Therefore, the question of over-centralization does not arise.

The National Cooperation Policy (NCP) 2025, unveiled on 24th July, 2025 stipulates its implementation based on the principle of cooperative federalism. Even the national-level committee constituted to draft the policy consisted of experts from the cooperative sector, representatives from national, state, district, and primary-level cooperative societies, Secretaries (Cooperation) and Registrars of Cooperative Societies of States, etc.

The policy was drafted following multi-level consultations and regional workshops involving stakeholders from the cooperative sector as well as State/UT Governments. The committee held 17 meetings and conducted four regional workshops (Ahmedabad, Bengaluru, Gurugram, and Patna), receiving a total of 648 inputs through the consultation process.

In line with the recommendations of the NCP, 2025, the Ministry has requested all States/UTs to formulate State-level Cooperation Policies in alignment with the NCP, so that the Central and State Governments can work together synergistically towards strengthening cooperative societies and the cooperative movement in the country. In this regard, most States have constituted policy drafting committees, and three States (Odisha, Himachal Pradesh, and Mizoram) have already launched their State-level Cooperation Policies.

The broad contours of objectives and setting up of national level multi-state cooperatives National Cooperative Exports Limited (NCEL) and National Cooperative Organics Limited (NCOL) were discussed and welcomed by all in the National Conference of State Cooperation Ministers/Principal Secretaries and RCSs, chaired by the Hon’ble Cooperation Minister on 8th and 9th September 2022.

(e): “Tribhuvan” Sahkari University has been established to function as an apex institution for the integration, coordination, and standardization of academic, training, research, and consultancy activities in the country. It would create a pan-India network by establishing outlying campuses in the country and also affiliate existing institute/college in States/UTs, to produce skilled workforce for the cooperative sector.

So far as the state level financial institutions are concerned, the following major steps have been taken by the Ministry. A complete list of steps is at Annexure-I. i. Umbrella Organization for Urban Cooperative Banks: National Federation of Urban Co-operative Banks and Credit Societies Ltd. (NAFCUB) has been established on the approval of the RBI as an Umbrella Organization (UO) for the UCB sector, which is providing necessary IT infrastructure and operational support to around 1,500 UCBs. It has launched various services like Digi Loan and Digi Pay.

ii. Sahakar Sarathi (Shared Service Entity): Sahakar Sarathi (Shared Service Entity) Private Limited has been established after approval of the RBI to provide digital infrastructure services to Rural Cooperative Banks, such as State Cooperative Banks andDistrict Central Cooperative Banks to enable them to deliver modern banking services.

This has launched 13 services for the Rural Cooperative Banking Sector.

(f): The Central Government policies and schemes are meant to strengthen the cooperative movement in the country. Since majority of cooperatives comes under the jurisdiction of State/UTs, the policies and schemes are made to complement and supplement the efforts of the State/UTs. The Ministry, through its policies such as National Cooperation Policy, 2025, is committed to work together with the States/UTs in the spirit of Cooperative Federalism so as to strengthen the cooperative movement in the country.

*****Annexure-I

1. Urban Cooperative Banks (UCBs) have been allowed to open new branches to expand

their business: UCBs can now open new branches up to 15% (maximum 10 branches) of the existing number of branches in the previous financial year without prior approval of the RBI.

2. UCBs have been allowed by the RBI to offer doorstep services to their customers:

Doorstep banking facility can now be provided by UCBs. Account holders of these banks can now avail various banking facilities at home, such as cash withdrawal, cash deposit, KYC, demand draft, and life certificate for pensioners, etc.

3. Notification of Scheduling norms for including Urban Cooperative Banks:

UCBs that are in compliance with the Eligibility Criteria for Business Authorisation and have maintained the minimum deposits required for classification as Tier 3 for the last two years are now eligible to be included in Schedule II of the Reserve Bank of India Act, 1934, and get 'Scheduled' status.

4. A Nodal Officer designated in RBI for regular interaction with UCBs: To meet the long-pending demand of the cooperative sector for closer coordination and focused interaction, RBI has notified a nodal officer.

5. Relief for Urban Cooperative Societies (UCBs) by reducing PSL target from 75% to 60%: The Reserve Bank of India has provided relief to Urban Co-operative Banks (UCBs) by reducing the Priority Sector Lending (PSL) target from the earlier level of 75 per cent to 60 per cent. This relaxation has eased compliance pressures on UCBs and provided them with greater operational flexibility in managing their lending portfolios.

6. Housing loan limit for Urban Cooperative Banks increased from 10% to 25%:

Housing loan limit for members of Urban Cooperative Banks has been increased from 10% of assets to 25% (up to Rs 3 crore) of their total loans & advances.

7. Relief in sub-limit of 12% sub-limit (weaker sections) by withdrawing of target of ₹ 2

lakh for women loan repayment: Removal of the target of ₹2 lakh for women borrowers under the 12% sub-limit for weaker sections simplifies PSL compliance and provides UCBs greater operational freedom in meeting PSL obligations.

8. Relief to Urban Cooperative Institutions by increasing 50% loan limit from ₹ 1 crore to ₹ 3 crore: The loan and advances exposure limit for Urban Cooperative Banks (UCBs) at 50% of loans and advances has been increased from ₹1 crore to ₹3 crore, which helps them meet the higher credit demands of individual borrowers, supports business growth and improves their competitiveness in the retail and SME lending segments.

9. Monetary ceiling for Gold Loan has been removed by RBI: RBI has removed the monetary ceiling from Rs. 2 lakhs for cooperative Banks at par with Commercial Banks.10. RBI extended the glide path for Security Receipts from FY 2025-26 to FY 2027-28:

RBI, vide circular dated 24.02.2025, has provided an additional two years for provisioning of non-performing assets through Asset Reconstruction Company for better management of capital and liquidity in urban co-operative banks so that these banks can minimize the losses on stressed assets.

11. Cooperative banks have been allowed to make one-time settlement of outstanding loans, like Commercial Banks: Co-operative banks, through board-approved policies, can now provide the process for settlement with borrowers, along with technical write-off.

12. Higher Housing Loan Limits: Reserve Bank of India has increased the individual housing loan limit for rural co-operative banks by two and a half times to Rs. 75 lakh and enabled them to lend to real estate up to 5% of total exposure.

13. License fee reduced for Cooperative Banks for AePS: License fee for onboarding Cooperative Banks to ‘Aadhaar Enabled Payment System’ (AePS) has been reduced by linking it to the number of transactions. Cooperative financial institutions are now to get the facility free of cost for the first three months of the pre-production phase. With this, members of onboarded Banks are now able to get the facility of banking at their home through biometrics.

14. UIDAI on 01.08.2025 has introduced a new framework for onboarding of Cooperative Banks on the Aadhaar Enabled Payment System (AePS). Now, only StCBs are required to onboard as Authentication User Agencies (AUA)/eKYC User Agencies (KUA); DCCBs will be allowed to use it through State Cooperative Bank as sub AUA/KUA.

15. Non-scheduled UCBs, StCBs, and DCCBs notified as Member Lending Institutions

(MLIs) in the CGTMSE Scheme to increase the share of cooperatives in lending:

Cooperative banks are now able to take advantage of risk coverage up to 85 percent on the loans given. Also, cooperative sector enterprises are able to get collateral-free loans from cooperative banks now. CGTMSE rationalized the eligibility criteria from 5% Gross NPA or less to 7% Gross NPA or less for registration of Cooperative Banks as Member Lending Institutions (MLIs) under the Scheme.

16. Banking Regulation Act is amended by the Government to make the term of the Board of Directors of Cooperative Banks as per the constitution (maximum 10 consecutive years).

17. Limit for Agricultural Cooperative Societies (Dairy) under Priority Sector Guidelines increased from ₹5 crore to ₹10 crore: RBI has increased the priority sector lending limit for Agricultural Cooperative Societies (Dairy) from ₹5 crore to ₹10 crore vide Master Direction dated 24.03.2025. This move enables banks to provide more credit support to Agricultural Cooperative Societies (Dairy), thereby strengthening agricultural infrastructure and boosting rural credit flow.18. RBI vide its Notification dated 07.10.2025, has included rural cooperative banks in its Integrated Ombudsman Scheme. This will bring more transparency and accountability to the functions of rural cooperative banks.

19. RBI vide Master Direction dated 04.12 2025, has allowed State Cooperative Banks

(StCBs) and District Central Cooperative Banks (DCCBs) to open new branches (maximum 10) through an automatic route. StCBs & DCCBs, subject to eligibility, will now be able to open new branches without delay and can expand their business.

20. RBI vide Master Direction dated 28.11.2025, has granted relaxation to the Rural and Urban cooperative banks in financial norms for providing modern banking services.

The previous requirements of Gross NPA being less than 7% and Net NPA not exceeding 3%, and the net profit criterion have been removed. Now the cooperative banks can easily provide modern banking services to their customers.

21. RBI vide Master Direction dated 04.12.2025, has issued Eligibility Criteria norms for Business Authorisation (ECBA), which will supersede the previous FSWM provisions.

The clause regarding no penalties in the last two years has been removed from these norms.

Now the Cooperative Banks will be able to easily open new branches and expand their business.

22. RBI vide letter dated 07.01.2026 has issued clarification in reference to Section 20 of the BR Act, due to which the Directors of Rural Cooperative Banks and their related Cooperative Societies are now eligible to avail loans from their concerned State Cooperative Banks & District Central Cooperative Banks, subject to stipulated conditions.

23. With a view to mitigating cyber fraud and ensuring prompt reporting and response, the Ministry of Cooperation has requested all States/Union Territories and co-operative banks to onboard the I4C and NCRP portals. More than 600 cooperative banks have onboarded on I4C.

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