The Reserve Bank of India (RBI) has released draft amendments to the governance framework for both Urban and Rural Co-operative Banks and has invited public comments on the proposals.
The draft notifications include the Draft Reserve Bank of India (Urban Co-operative Banks – Governance) Amendment Directions, 2026 and the Draft Reserve Bank of India (Rural Co-operative Banks – Governance) Amendment Directions, 2026.
The proposed amendments seek to introduce a mandatory minimum cooling-off period of three years for directors of co-operative banks after completion of the maximum permissible continuous tenure of ten years. The tenure requirement is prescribed under Section 10A(2A)(i) read with Section 56 of the Banking Regulation Act, 1949.
For Urban Co-operative Banks, the ceiling on continuous tenure became applicable with effect from June 29, 2020. In the case of Rural Co-operative Banks, comprising State Co-operative Banks and Central Co-operative Banks, the provision came into force from April 1, 2021. The maximum tenure was increased from eight years to ten years through the Banking Laws (Amendment) Act, 2025, which came into effect on August 1, 2025.
The RBI observed that in certain cases, directors attempted to circumvent the statutory tenure limit by resigning for brief periods and returning to the board through re-election or co-option within a short span. According to the central bank, such practices enable directors to continue on the board beyond the legally permissible tenure and defeat the intent and spirit of the law.
To address this issue, the RBI has proposed the insertion of a new provision in the existing Governance Directions, 2025. Under the draft amendments, a director who has completed ten years of continuous tenure on the board of an Urban Co-operative Bank, State Co-operative Bank, or Central Co-operative Bank shall be eligible for re-appointment to the board of the same bank only after undergoing a minimum cooling-off period of three years.
During the cooling-off period, the director shall not be associated with the concerned bank in any capacity other than as a member or customer. However, the draft directions clarify that this restriction will not preclude appointment as a director on the board of another bank.
The RBI has further clarified that, for the purpose of calculating continuous tenure, periods of service separated by interruptions of less than three years shall be reckoned together, while service preceding an interruption of three years or more shall not be included.
The central bank has invited comments and feedback from the public and stakeholders on both draft directions up to January 30, 2026. Feedback may be submitted through the ‘Connect2Regulate’ section on the RBI website or forwarded to the Department of Regulation (Governance Section), Reserve Bank of India, Mumbai, by post or email.
“THE INTENT AND SPIRIT OF THE LAW “ should be explained thoroughly first. Then the comments and feedback from the public and stakeholders be taken over it. If this is largely accepted then invite comments and feedback for 3 years cooling period.
The proposed ammendments of RBI I are ok and should be implemented..RBI should ensure thatbeach coop bank follow these revised guidelines in letter and spirit immediately .
Incidentally, the cap of 70 years foe eligibility criteria for directorship should be removed particularly in respect of persons who have professional background in Banking in the capacity of Senior executive for st least 10 years
The 10 years tenure should be calculated on the date of election or appointment, if he has completed 10 years continuous directorship, he should be disqualified from either contestio or appointment straightly.
These will unable to restrict mischief mongers.