The Reserve Bank of India (RBI) has issued new directions permitting State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs) to invest in the share capital of a Shared Service Entity (SSE) established by NABARD.
This step aims to strengthen co-operative banking infrastructure while providing banks greater flexibility in non-SLR investments.
The move comes through the RBI (Investments in Non-SLR instruments by State / Central Co-operative Banks) Directions, 2025, which amend the earlier circular issued on July 14, 2016. The original circular laid down prudential norms for non-SLR investments, including permissible instruments, total investment limits, and restrictions on unlisted securities.
Under the new directions, StCBs and CCBs may subscribe to SSE shares on a voluntary basis.
Such investments are limited to 5% of the bank’s owned funds, including paid-up capital and reserves. Significantly, these investments will be exempt from the overall prudential limits on non-SLR investments and the restrictions on unlisted instruments, in line with the circular.
RBI emphasized that these amendments are made under its powers granted by Sections 35A and 56 of the Banking Regulation Act, 1949, and are considered necessary in the public interest. The move is expected to help co-operative banks leverage NABARD’s SSE to improve efficiency, adopt modern technology, and strengthen operational support.
In a circular on Friday, Usha Janakiraman, Chief General Manager-in-Charge of RBI, stated that the directions provide a safe and structured framework for co-operative banks to invest in centralized support infrastructure while maintaining financial prudence. The directions are effective immediately, marking a significant step in the modernization and strengthening of India’s co-operative banking sector.
It bears recalling that in collaboration with NCDC and Rural Cooperative Banks (RCBs), NABARD has established the Shared Services Entity (SSE), named Sahakar Sarathi, to modernize RCBs and enhance their digital capabilities.
With an authorized capital of Rs 1,000 crore, equally contributed by NABARD (Rs 333.33 crore), NCDC (Rs 333.33 crore), and RCBs (Rs 333.34 crore), the SSE will provide essential services such as internet and mobile banking, UPI, AEPS, cybersecurity, and back-end operations.
It will operate across three verticals, Technology, Operations, and Support Functions, offering solutions including CBS, fraud risk management, loan origination, HR services, and IT procurement.
This initiative aims to reduce operational costs, improve service delivery, and ensure regulatory compliance, enabling RCBs to compete effectively with commercial banks and better serve rural customers.
Notably, NABARD had also organized a National Conference on “Shared Services Entity and Cooperation among Cooperatives” a few months ago at NBSC, Lucknow, which was attended by Dr. Ashish Kumar Bhutani, Secretary, Ministry of Cooperation.
How to get the share?