The Reserve Bank of India (RBI) on July 31, 2026, issued the Reserve Bank of India (Urban Co-operative Banks – Miscellaneous) Supervisory Directions, 2026, in exercise of powers under Section 35-A read with Section 56 of the Banking Regulation Act, 1949. The Directions apply to all Primary Co-operative Banks (UCBs) as defined under Section 5(ccv) of the Act and take effect immediately. They consolidate provisions covering Core Banking Solution (CBS) implementation, a Prompt Corrective Action (PCA) Framework, the Fair Practices Code on interest charging, nomination facilities, fraud prevention measures, vigilance requirements, and repeal of prior circulars on these subjects.
The PCA Framework, detailed in Chapter III, applies to Tier 2, Tier 3, and Tier 4 UCBs (excluding those under All Inclusive Directions), while Tier 1 UCBs remain under enhanced monitoring outside this framework. It tracks three parameters — Capital (CRAR), Asset Quality (Net NPA ratio), and Profitability (net profit) — across three escalating risk thresholds, triggering mandatory actions such as capital-raising requirements, dividend restrictions, and curbs on branch or deposit expansion, along with discretionary actions spanning governance, strategy, credit risk, and capital measures. A UCB may exit PCA only after four consecutive quarters (including one audited annual statement) showing no threshold breaches, subject to RBI's supervisory comfort regarding sustainable financial improvement.
Beyond the PCA Framework, the Directions mandate full CBS rollout across UCB branches with technical guidance from IDRBT, prescribe fraud prevention safeguards covering cash handling, negotiable instruments, computerised branches, and insurance, and set out vigilance obligations. The notification also addresses repeal and savings provisions, clarifying that other applicable laws remain unaffected and providing interpretive guidance for terms not otherwise defined, which default to meanings under the RBI Act, 1934, the Banking Regulation Act, 1949, the Companies Act, 2013, or RBI's published Glossary of Terms.
[Notification No. RBI/DoS/2026-27/443, DoS.CO.PPG.37/11.01.005/2026-27]
