The Reserve Bank of India’s newly implemented cooling-off norms for directors of Urban and Rural Co-operative Banks have triggered uncertainty across the co-operative banking sector, particularly regarding the continuation of existing long-serving directors.
The issue has gained prominence following the RBI’s issuance of the final “Governance Amendment Directions, 2026” for Urban Co-operative Banks (UCBs) and Rural Co-operative Banks (RCBs) on May 25. Under the amended directions, a director completing ten years of continuous tenure on the board of the same co-operative bank can be reappointed only after undergoing a minimum cooling-off period of three years.
The RBI has further stated that during this cooling-off period, the director “shall not be associated with the bank in any capacity / manner other than as a member / customer.” The directions also clarify that temporary breaks of less than three years between two terms would continue to be counted while calculating continuous tenure.
However, the final amendment directions do not expressly clarify whether sitting directors who have already crossed the ten-year threshold would be allowed to complete their existing elected term, leading to uncertainty within the sector.
The matter has drawn further attention after an annexure titled “Statement on the feedback received on draft Amendment Directions” began circulating within co-operative banking circles. The annexure relates to stakeholder feedback submitted on the draft directions issued on January 8, 2026.
According to the annexure, stakeholders had requested the RBI to allow sitting directors to complete their current term, introduce the cooling-off provisions in a phased manner, and count the ten-year tenure from August 1, 2025 or from the effective date of the final directions.
The RBI, however, rejected these suggestions, stating: “Not Accepted. The feedback is inconsistent with the provisions contained in section 10A (2A) (i), read with section 56, of the Banking Regulation Act, 1949.”
The rejection of these proposals has triggered discussions across the co-operative banking sector regarding the continuation of directors who have already completed ten years on bank boards. According to sector sources, several Urban Co-operative Banks are examining the implications of the amended governance framework on existing directors who may have crossed the prescribed tenure limit.
Banking experts say the RBI’s reference to “Constitution of Board and Appointment of Directors” in the amendment directions assumes significance, as it directly relates to the governance framework governing the composition of bank boards. Several co-operative banks are therefore awaiting further regulatory clarity regarding the status of existing long-serving directors.
Meanwhile, the Karnataka State Co-operative Urban Banks Federation, in a letter addressed to member banks, informed that the RBI had not accepted stakeholders’ demands related to the amended cooling-off norms, including the request that sitting directors be allowed to complete their current term.