The Reserve Bank of India (RBI), on February 11, 2026, in consultation with the Government of India, announced that loans sanctioned by banks to the National Cooperative Development Corporation (NCDC) for on-lending to cooperative societies shall be eligible for classification as Priority Sector Lending (PSL) under the respective categories, in line with the Master Direction on Priority Sector Lending, 2025. This dispensation applies to banks other than Regional Rural Banks, Urban Cooperative Banks, Small Finance Banks and Local Area Banks, and is aimed at facilitating greater credit flow to cooperative societies through NCDC.
The measures form part of a broader reform agenda to strengthen the financial health, governance, deposit security and digital inclusion of cooperative banks. Key steps include allowing Urban Cooperative Banks (UCBs) to open new branches, enhancing housing loan limits from 10% to 25% of total loans and advances, extending the tenure of directors from 8 to 10 years under amendments to the Banking Regulation Act, and reducing licensing fees for onboarding cooperative banks onto the Aadhaar enabled Payment System (AePS).
Further, institutional and technological support has been reinforced through the establishment of the National Urban Co-operative Finance and Development Corporation Limited (NUCFDC) as an umbrella organization for UCBs, and the creation of ‘Sahakar Sarthi’, a Shared Services Entity, to provide technology services to Rural Cooperative Banks. Additional safeguards include the inclusion of Rural Cooperative Banks under the Integrated Ombudsman Scheme and continued deposit insurance coverage by DICGC up to ₹5 lakh per depositor per bank, thereby enhancing confidence in the cooperative banking system.
[RBI/2025-26/PSL/NCDC Measures]
