**Executive Summary**
This document outlines the Reserve Bank of India (Urban Co-operative Banks - Governance) Amendment Directions, 2026, effective immediately. These directions amend the 2025 directions concerning the constitution of the Board and Appointment of Directors, specifically addressing circumvention of director tenure rules. The key amendment introduces a mandatory cooling-off period for directors seeking reappointment.
**Key Points / Main Content**
* **Amendment Title and Authority:**
* These Directions are named the Reserve Bank of India (Urban Co-operative Banks - Governance) Amendment Directions, 2026.
* Issued under the authority of Section 35A, Section 10A(2A)(i), and Section 56 of the Banking Regulation Act and other relevant laws.
* **Effective Date and Modification:**
* The directions come into force with immediate effect.
* These directions modify the Reserve Bank of India (Urban Co-operative Banks - Governance) Directions, 2025.
* **Director Tenure and Cooling-Off Period (Amendment to Paragraph 7 of the 2025 Directions):**
* After a continuous tenure of 10 years on the Board of a UCB, a director is eligible for reappointment (via election, co-option, or any other manner) only after a minimum cooling-off period of three years.
* During the cooling-off period, the director cannot be associated with the UCB in any capacity other than as a member or customer.
* This does not prevent the director from being appointed to the Board of another bank.
* For calculating continuous tenure, periods of directorship interrupted by less than three years are included, while those interrupted by at least three years are excluded.
**Impact Analysis**
**Stakeholder: Urban Co-operative Banks (UCBs)**
* **Impact:** UCBs must implement the new cooling-off period rule for their directors. This could lead to changes in board composition and require adjustments to director appointment processes.
* **Action Required:** UCBs must update their internal policies and procedures to comply with the new cooling-off period requirement for directors.
**Stakeholder: Directors of UCBs**
* **Impact:** Directors who have served a continuous tenure of 10 years are now subject to a mandatory three-year cooling-off period before being eligible for reappointment to the same UCB's board.
* **Action Required:** Directors approaching or having completed 10 years of continuous service must be aware of the cooling-off period and its implications for their future board appointments.
**Stakeholder: Reserve Bank of India (RBI)**
* **Impact:** Improved governance and reduced circumvention of director tenure limits in UCBs.
* **Action Required:** Enforcement and supervision of the new regulations to ensure compliance across all UCBs.
Key Entities Referenced
Reserve Bank of India (Urban Co-operative Banks - Governance) Amendment Directions, 2026: The primary subject of the document, detailing amendments to governance directions for Urban Co-operative Banks.
Reserve Bank of India (Urban Co-operative Banks - Governance) Directions, 2025: The document being modified by the Amendment Directions, 2026, providing the base governance rules for Urban Co-operative Banks.
Banking Regulation (Amendment) Act, 2025: Amendment Act which increased the maximum continuous tenure of directors of UCBs from eight years to 10 years.
Banking Regulation Act, 1949: Act amended in 2020, which originally introduced Section 10A(2A)(i) prescribing a ceiling on the continuous tenure of directors in UCBs.
Urban Co-operative Banks (UCBs): The type of financial institutions to which the directions apply.
DRAFT
Reserve Bank of India (Urban Co-operative Banks - Governance) Amendment
Directions, 2026
Please refer to Reserve Bank of India (Urban Co-operative Banks - Governance)
Directions, 2025 (DOR.GOV.REC.No.192/18-10-014/2025-26) dated November 28,
2025. Chapter-II of these directions have provisions regarding the Constitution of
Board and Appointment of Directors.
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 primary (urban) co-operative banks
(hereinafter collectively referred to as ‘UCBs’ and individually as ‘UCB’). The provision
had come into force for UCBs with effect from June 29, 2020. This provision was
further amended by the Banking Laws (Amendment) Act, 2025 to increase the
maximum continuous tenure of directors of UCBs 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 UCB 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 (Urban 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 (Urban Co-operative
Banks - Governance) Directions, 2025 in the manner as specified hereinafter.
(4) After paragraph 7 of the Reserve Bank of India (Urban Co-operative Banks -
Governance) Directions, 2025, the following shall be inserted:7A. A director on the Board of a UCB, 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 UCB
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 UCB 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 UCB 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