**Executive Summary**
The Reserve Bank of India (RBI) issues the "Reserve Bank of India (Rural Co-operative Banks - Governance) Amendment Directions, 2026" to amend the RBI's 2025 Directions on the governance of rural co-operative banks. These directions, effective immediately, address the issue of directors circumventing tenure limits and aim to ensure compliance with the intent of the Banking Regulation Act. The document addresses concerns surrounding directors resigning and being re-elected to extend their tenure beyond legal limits.
**Key Points / Main Content**
* **Amendment Scope**: These Directions modify the "Reserve Bank of India (Rural Co-operative Banks - Governance) Directions, 2025."
* **Director Tenure and Cooling-Off Period**:
* A director of a State Co-operative Bank (StCB) or Central Co-operative Bank (CCB), after serving a continuous tenure of 10 years, is eligible for reappointment only after a mandatory cooling-off period of three years.
* During the cooling-off period, the director cannot be associated with the same StCB/CCB in any capacity other than as a member or customer.
* This cooling-off period does not prevent the director from being appointed to the board of another bank.
* **Tenure Calculation**:
* The total tenure calculation includes any directorship preceding an interruption of less than three years.
* Any period of directorship preceding at least a three-year interruption is excluded from tenure calculations.
**Impact Analysis**
**Stakeholder**: StCBs and CCBs (State Co-operative Banks and Central Co-operative Banks)
* **Impact**: Must ensure compliance with the new rules regarding director tenure, cooling-off periods, and re-appointment eligibility.
* **Action Required**: Review director appointment procedures, update governance policies, and communicate changes to directors and relevant personnel.
**Stakeholder**: Directors of StCBs and CCBs
* **Impact**: Affected by the new restrictions on tenure and the mandatory cooling-off period before re-appointment to the same bank's board.
* **Action Required**: Plan for potential career transitions and ensure compliance with cooling-off restrictions.
**Stakeholder**: Reserve Bank of India
* **Impact**: Responsible for enforcing the new directions and ensuring compliance across rural co-operative banks.
* **Action Required**: Implement monitoring mechanisms to track director tenure and cooling-off periods.
Key Entities Referenced
Reserve Bank of India (Rural Co-operative Banks - Governance) Amendment Directions, 2026: The primary subject; amends regulations for rural co-operative banks' governance.
Reserve Bank of India (Rural Co-operative Banks - Governance) Directions, 2025: The Directions being modified by the 2026 Amendment.
Banking Regulation Act, 1949: The original Act providing the legal foundation for regulation, especially section 10A(2A)(i) regarding directors' tenure.
Banking Laws (Amendment) Act, 2025: Amended the Banking Regulation Act, 1949 regarding the continuous tenure of directors in State Co-operative banks (StCBs) and Central Co-operative banks (CCBs).
Section 35A: Section of the Banking Regulation Act, 1949, conferring powers to Reserve Bank of India (RBI) regarding these directions.
DRAFT
Reserve Bank of India (Rural Co-operative Banks - Governance) Amendment
Directions, 2026
Please refer to Reserve Bank of India (Rural Co-operative Banks - Governance)
Directions, 2025 (DOR.GOV.REC.No.217/18-10-015/2025-26) dated November 28,
2025. Chapter-II of these directions have provisions regarding the Constitution of
Board.
2. The Banking Regulation (Amendment) Act, 2020 had made section 10A(2A)(i) of
the Banking Regulation Act, 1949 (in short, “the Act”), which prescribed a ceiling on
continuous tenure of directors, applicable to State Co-operative banks (hereinafter
collectively referred to as ‘StCBs’ and individually as ‘StCB’) and Central Co-operative
banks (hereinafter collectively referred to as ‘CCBs’ and individually as ‘CCB’). The
provision had come into force for StCBs and CCBs with effect from April 1, 2021. This
provision was further amended by the Banking Laws (Amendment) Act, 2025 to
increase the maximum continuous tenure of directors of StCBs and CCBs from eight
years to 10 years and the amended provision has come into effect on August 1, 2025.
3. In a few cases, directors have been found to be resorting to certain methods to
circumvent the provisions of the Act such as resigning briefly from office and being re-
elected / co-opted to the Board within a short period of time, thereby continuing to be
on the Board of a StCB / CCB for an extended period beyond the legally permissible
tenure, which defeats the intent and spirit of the statutory provision.
4. Accordingly, in exercise of the powers conferred by Section 35A read with Section
10A(2A)(i) and Section 56 of the Act, and all other provisions / laws enabling the
Reserve Bank of India in this regard, Reserve Bank of India being satisfied that it is
necessary and expedient in the public interest so to do, hereby issues these Directions
hereinafter specified.
(1) These Directions shall be called the Reserve Bank of India (Rural Co-operative
Banks - Governance) Amendment Directions, 2026.
(2) These Directions shall come into force with immediate effect.
(3) These Directions shall modify the Reserve Bank of India (Rural Co-operative
Banks - Governance) Directions, 2025 in the manner as specified hereinafter.(4) After paragraph 7 of the Reserve Bank of India (Rural Co-operative Banks -
Governance) Directions, 2025, the following shall be inserted:
7A. A director on the Board of a StCB / CCB, after completing a continuous
tenure of 10 years in office, shall be eligible to be re-appointed, whether by
election or co-option or in any other manner, as a director on the Board of the
same StCB / CCB only after undergoing a minimum cooling-off period of three
years. During the cooling-off period, the said director shall not be associated
with the StCB / CCB in any capacity / manner other than as a member /
customer. This, however, shall not preclude him / her from being appointed as
a director on the Board of another bank.
Explanation:
For calculating the period of continuous tenure, the total time served on the
Board of the StCB / CCB including the period of directorship preceding an
interruption of less than three years but excluding the period of directorship
preceding at least a three-year interruption shall be reckoned.
Yours faithfully,
( )
Chief General Manager