The Karnataka State Cooperative Urban Banks Federation Ltd. and senior co-operative banker Yennegere R. Venkataramayya have approached the Karnataka High Court challenging the constitutional validity of the Reserve Bank of India’s Urban Co-operative Banks Governance Amendment Directions, 2026, along with certain provisions of the Banking Laws (Amendment) Act, 2025.
Filed before the Bengaluru Bench of the Karnataka High Court, the writ petition seeks to quash the RBI directions issued on May 25, 2026, alleging that they are without jurisdiction, ultra vires the Constitution, and violative of the petitioners’ rights under Articles 14 and 19(1)(c).
The petition specifically challenges the amendment to Section 10A(2A)(i) of the Banking Regulation Act, 1949, which introduces tenure restrictions and cooling-off requirements for directors of Urban Co-operative Banks (UCBs).
The petitioners contend that co-operative societies fall within the legislative domain of the states under Entry 32 of List II of the Constitution and that Parliament cannot impose such restrictions on directors of co-operative banks registered under the Karnataka Co-operative Societies Act, 1959.
The Federation has also sought a declaration that any action taken against directors of member UCBs under the impugned provisions would be without authority of law. Additionally, it has sought an ad-interim stay on the implementation of the RBI directions pending disposal of the petition.
The matter came up before Justice Suraj Govindaraj as a fresh matter on June 12. The next hearing is scheduled for July 7, 2026. Sources said the Reserve Bank of India has lodged a caveat, seeking to ensure that it is heard before any interim order is passed in the matter.
Talking to Indian Cooperative, the CEO of the Karnataka State Cooperative Urban Banks Federation said, “We have filed the writ petition before the Karnataka High Court. The matter has been admitted and the next hearing is scheduled for July 7. We are hopeful of getting some relief from the Court. In the meantime, the RBI has already filed a caveat in the matter.”
The case is expected to have far-reaching implications for the governance of Urban Co-operative Banks and the ongoing debate over the respective powers of the Centre and the States in regulating co-operative institutions.
It bears recalling that shortly after the RBI issued the Urban Co-operative Banks Governance Amendment Directions, 2026, the Karnataka State Co-operative Urban Banks Federation had sought detailed clarifications from the central bank on the implementation of the new governance norms.
Among other issues, the Federation sought RBI’s guidance on the applicability of the 10-year tenure cap to Chairmen and professional directors, the treatment of service rendered in different capacities on the board, and the existence of any age limit for Chairmen.
The latest legal challenge indicates that the Federation’s concerns over the amended framework have now escalated from seeking regulatory clarification to judicial scrutiny.
