The Government has constituted a Task Force under the National Bank for Agriculture and Rural Development to provide inputs for policy formulation and address key challenges faced by the rural cooperative banking sector. The information was shared by Union Minister for Home and Cooperation Amit Shah in a written reply in the Rajya Sabha on Wednesday.
According to the minister, the Task Force has been established in line with the mandate of the National Cooperation Policy 2025. Its primary objective is to examine structural and operational challenges faced by rural cooperative banks and recommend measures to strengthen their functioning and sustainability.
Rural cooperative banks play a crucial role in providing affordable credit and financial services to farmers, small entrepreneurs and rural communities. However, these institutions often face issues related to regulatory compliance, capital adequacy, governance and technological modernization. The Task Force will study such challenges and suggest policy reforms aimed at improving efficiency and financial resilience within the cooperative banking system.
Shah also informed the House that the Reserve Bank of India has issued a clarification regarding Section 20 of the Banking Regulation Act, 1949 through a letter dated January 7, 2026. The clarification relates to lending provisions applicable to cooperative banks and their related entities.
Following the clarification, directors of rural cooperative banks and their associated cooperative societies have become eligible to avail loans from their respective State Cooperative Banks and District Central Cooperative Banks, subject to certain stipulated conditions. The move is expected to remove ambiguity in the interpretation of the law and facilitate smoother credit access within the cooperative banking network.
In another significant development aimed at strengthening the sector, Shah said that the RBI has permitted State Cooperative Banks and District Central Cooperative Banks to expand their branch networks. As per an RBI Master Direction issued on December 4, 2025, these banks are now allowed to open up to ten new branches through the automatic route.
This provision will enable cooperative banks to expand their operations and improve outreach, particularly in underserved rural and semi-urban areas. The simplified approval process is expected to reduce administrative delays and help cooperative banks respond more effectively to local credit requirements.
The government believes that these steps, combined with the recommendations of the NABARD-led Task Force, will contribute to strengthening the rural cooperative banking structure and enhancing its role in supporting agricultural growth, rural livelihoods and financial inclusion across the country.