In a significant development for India’s cooperative banking sector, the Andhra Pradesh State Cooperative Urban Banks & Credit Societies Federation has approached the Andhra Pradesh High Court challenging the constitutional validity of the Banking Laws (Amendment) Act, 2025 and the Banking Regulation (Co-operative Societies) Amendment Rules, 2025.
The Federation, representing 36 cooperative banks across the state, has argued that the amendments undermine the autonomy of cooperative institutions and violate the federal structure of the Constitution. According to the petition, the Centre has exceeded its legislative competence by venturing beyond banking regulation into the internal governance of cooperative societies.
The plea specifically challenges provisions such as the imposition of a 10-year cap on directors’ tenure and the powers granted to the Reserve Bank of India to remove directors and reconstitute boards. The Federation contends that these measures directly interfere with management and governance, which fall within the exclusive domain of State legislatures under Entry 32 of the State List.
Relying on constitutional provisions and judicial precedents, the Federation has asserted that Parliament’s authority is limited to regulating banking functions and does not extend to controlling cooperative structures. It has cited the Supreme Court’s ruling in Union of India v. Rajendra N. Shah, which affirmed that cooperative societies are a State subject. The petition also invokes the basic structure doctrine, referring to Kesavananda Bharati v. State of Kerala and S.R. Bommai v. Union of India, to argue that federalism cannot be diluted through central legislation.
The Federation has further contended that the amendments violate fundamental rights, including the right to form associations under Article 19(1)(c), and undermine Article 43B, which promotes democratic and autonomous functioning of cooperative societies. It has termed the provisions arbitrary, noting that similar tenure restrictions are not imposed on credit societies and that exemptions granted to Chairmen and Whole-Time Directors lack a rational basis.
Another key concern raised is the issue of dual regulation. The Federation argues that the amendments would subject cooperative banks to overlapping control by State authorities and the Reserve Bank of India, leading to administrative uncertainty and governance challenges.
Seeking interim relief, the Federation has urged the High Court to stay the implementation of the amendments, particularly the provisions relating to disqualification of directors after 10 years. It warned that, without such relief, several elected directors may be removed during the pendency of the case, causing irreparable harm.
The case is expected to have far-reaching implications for the cooperative banking sector and Centre-State relations
