In a bid to evolve a coordinated response to recent regulatory changes, the apex body of Urban Cooperative Banks (UCBs) and credit societies, the National Federation of Urban Cooperative Banks and Credit Societies Ltd. (NAFCUB) has written to all State-level federations and associations seeking their views on the Central government’s notification on “ineligible directors”.
In its communication addressed to chairpersons and chief executives of State-level federations, NAFCUB referred to the Gazette notification issued by the Ministry of Finance, Department of Financial Services, on December 10, 2025. The notification amends the Banking Regulation (Cooperative Societies) Rules, 2025, redefining the criteria for “ineligible directors”, with effect from December 15, 2025.
Taking note of the seriousness and far-reaching implications of the amendment, NAFCUB informed that its Board has constituted a Working Group to examine the issue in detail. The first meeting of the Working Group was held virtually on January 5, 2026, during which the matter was discussed at length.
Following the meeting, NAFCUB decided to approach State-level federations of UCBs and credit societies to seek their considered views and suggestions. The federation has requested all State-level bodies to study the matter carefully and submit their inputs by January 12, 2026, enabling NAFCUB to chalk out a collective and informed future course of action. The issue has been flagged as “most urgent”.
It is learnt that the Working Group has decided that, after compiling suggestions received from State-level federations, the matter will be taken up with the concerned authorities, including the Ministry of Cooperation, the Reserve Bank of India (RBI) and the Union Ministry of Finance, as deemed appropriate.
NAFCUB has circulated a detailed note prepared by Working Group member Raghvendra Rao, along with a copy of the Gazette notification, to all State federations for reference. The note raises several constitutional, legal and cooperative governance concerns, emphasising that cooperation is a State subject under the Constitution.
The note also refers to the Supreme Court’s judgment on the 97th Constitutional Amendment, which clarified that Parliament cannot unilaterally impose provisions affecting the structure, management and democratic functioning of cooperative societies governed by State laws.
Among the major issues highlighted are the alleged infringement of members’ fundamental rights, interference in the democratic process of electing directors, inconsistency between cooperative banks and other credit societies operating under the same State laws, and the expanding role of the RBI into areas traditionally regulated by State cooperative legislation. It further underlines that elections, tenure, qualifications of directors and management have historically remained within the jurisdiction of State governments.
The Working Group has also pointed out that the recent amendments run contrary to internationally accepted cooperative principles of autonomy and democratic member control, an issue of particular significance as 2025 is being observed as the International Year of Cooperatives by the United Nations.
The development reflects a growing effort within the cooperative banking sector to seek clarity, consensus and constitutional alignment on regulatory changes that could have a lasting impact on the governance and autonomy of cooperative institutions across the country.
