RBI and NABARD Strengthen Governance of Cooperative Banks
ECONOMY & POLICY

RBI and NABARD Strengthen Governance of Cooperative Banks

The Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (NABARD) have set out a strengthened regulatory and supervisory framework to improve the governance of cooperative banks. The reforms aim to enhance transparency, accountability and depositor protection through legislative amendments and safeguards. Key changes encompass amendments to the Banking Regulation Act and the Multi-State Cooperative Societies (MSCS) Act, the establishment of a Cooperative Ombudsman and a Cooperative Election Authority.

The Banking Regulation Act has been amended to limit the term of the board of directors of cooperative banks, excluding the chairperson and whole-time directors, to a maximum of 10 consecutive years to promote board renewal and oversight. The MSCS Act now provides for the appointment of a Cooperative Ombudsman to address complaints and appeals from members of multi-state cooperative societies concerning deposits and equitable benefits. The Cooperative Election Authority will be tasked with conducting free and fair elections in all multi-state cooperative societies to strengthen governance and accountability.

RBI issued a Master Direction on Fraud Management in 2024 containing comprehensive guidelines on fraud reporting, principles of natural justice, governance mechanisms, early warning systems, staff accountability and auditor roles. The regulator’s Prompt Corrective Action (PCA) framework requires identified cooperative banks to initiate remedial measures promptly to restore financial health and protect depositor interests. Guidelines for a risk based internal audit system have also been issued for urban cooperative banks to bolster internal controls.

NABARD has implemented a Turn Around Plan (TAP) to reduce losses and improve the performance of State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs) through financial monitoring, business diversification, governance improvements and technology adoption. A financial safety net is provided through the Deposit Insurance and Credit Guarantee Corporation (DICGC), which insures various types of deposits, inclusive of principal and interest, up to Rs 0.5 mn per depositor in cooperative banks. The minister of state in the Ministry of Finance informed the Lok Sabha of these measures, emphasising their role in protecting depositors and restoring confidence in the cooperative banking sector.

The Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (NABARD) have set out a strengthened regulatory and supervisory framework to improve the governance of cooperative banks. The reforms aim to enhance transparency, accountability and depositor protection through legislative amendments and safeguards. Key changes encompass amendments to the Banking Regulation Act and the Multi-State Cooperative Societies (MSCS) Act, the establishment of a Cooperative Ombudsman and a Cooperative Election Authority. The Banking Regulation Act has been amended to limit the term of the board of directors of cooperative banks, excluding the chairperson and whole-time directors, to a maximum of 10 consecutive years to promote board renewal and oversight. The MSCS Act now provides for the appointment of a Cooperative Ombudsman to address complaints and appeals from members of multi-state cooperative societies concerning deposits and equitable benefits. The Cooperative Election Authority will be tasked with conducting free and fair elections in all multi-state cooperative societies to strengthen governance and accountability. RBI issued a Master Direction on Fraud Management in 2024 containing comprehensive guidelines on fraud reporting, principles of natural justice, governance mechanisms, early warning systems, staff accountability and auditor roles. The regulator’s Prompt Corrective Action (PCA) framework requires identified cooperative banks to initiate remedial measures promptly to restore financial health and protect depositor interests. Guidelines for a risk based internal audit system have also been issued for urban cooperative banks to bolster internal controls. NABARD has implemented a Turn Around Plan (TAP) to reduce losses and improve the performance of State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs) through financial monitoring, business diversification, governance improvements and technology adoption. A financial safety net is provided through the Deposit Insurance and Credit Guarantee Corporation (DICGC), which insures various types of deposits, inclusive of principal and interest, up to Rs 0.5 mn per depositor in cooperative banks. The minister of state in the Ministry of Finance informed the Lok Sabha of these measures, emphasising their role in protecting depositors and restoring confidence in the cooperative banking sector.

Related Stories

Gold Stories

Next Story
Resources

Schindler named among Forbes’ World’s Best Employers 2026

Schindler has been named among Forbes’ World’s Best Employers 2026, a global ranking recognising companies for their workplace environments.Compiled by Forbes in partnership with Statista, the ranking is based on independent employee feedback, including whether employees would recommend their organisation to friends and family.The company said the recognition reflected its focus on creating a workplace where employees can develop their expertise and build careers. ..

Next Story
Infrastructure Urban

India needs an export-execution mindset: Vishesh Jain

Interview with Vishesh Jain, Founder & CEO, EximpleWhat gaps in India’s global trade ecosystem led you to build Eximple, and what problem did you see businesses struggling with most?Eximple came out of a problem that all three founders had seen from different choke points in the trade ecosystem. India has millions of MSMEs and manufacturers, and many of them can make products that are genuinely competitive on quality. Yet only a small fraction is able to build meaningful international businesses. In our experience, the gap is usually not manufacturing capability; it is the ability to exe..

Next Story
Building Material

Nuvoco reports 13.5% revenue growth in Q2 FY27

Nuvoco Vistas Corp. Ltd. reported consolidated revenue of Rs 27.9 billion for Q2 FY27, up 13.5% year on year. Cement sales volume rose 9% to 4.7 million tonnes (MMT), while EBITDA increased 11% to Rs 4.11 billion.The company said it began its cement operations in 2014 with a 2.3 MMT per annum (MMTPA) operation at Nimbol. It now aims to reach 35 MMTPA of cement capacity by FY28, nearly 15 times its initial capacity. Its portfolio spans cement, ready-mix concrete and modern building materials.On sustainability and cost efficiency, Nuvoco partnered with CleanMax for a 46.4 MW wind-solar hybrid re..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

SPECIAL OFFER
QR Code