Commercial banks hold most of India's deposits, but they are not the only lenders in small towns and villages. Two other families of banks were built for that job. Co-operative banks are owned by their members and run on "one member, one vote". Regional rural banks (RRBs) are government-owned, sponsored by a commercial bank and confined to one state. Together they make up 1,826 of the 1,950 banks insured by the DICGC, yet they hold only a small share of the system's money. This part explains how each is structured, who regulates it, why so many co-operative banks have failed, and how RRBs went from 196 small, loss-prone banks to 28 state-level banks with record profits in 2025-26.
Part 18, RBI regulation of banks and NBFCs, gives a short overview of both types and the four-tier table for UCBs. Part 15, the RBI and financial stability, tells the PMC Bank story. Part 21, the structure of Indian banking, places these banks in the wider system. This part goes deeper into the structure, the law and the numbers.
In the news
- 2 Sep 2026: RBI meets the Registrars. The RBI hosted the third Conference of Registrars of Cooperative Societies in New Delhi on 1 September, with Deputy Governors Swaminathan J and Shirish Chandra Murmu and the Central Registrar. They discussed governance, timely resolution of weak UCBs and better coordination between the RBI and the Registrars. Why it matters for the exam: it shows dual control at work: the RBI regulates the bank, while the Registrar controls the society.
- 25 Aug 2026: record RRB profits. A review chaired by the Secretary, Department of Financial Services, reported that the 28 RRBs earned a record net profit of ₹10,176 crore in 2025-26, against ₹6,820 crore in 2024-25. Gross NPAs fell to an all-time low of 5.3%, total business crossed ₹13.5 lakh crore and the credit-deposit ratio reached 75.2%. Why it matters for the exam: these are the latest RRB numbers, and the profit figure is a likely question.
- 5 Aug 2026: UCB licensing to resume. In its Statement on Developmental and Regulatory Policies, the RBI said it would resume "on tap" licensing of UCBs after a pause of more than two decades, and it released draft guidelines the same day for comments until 5 September 2026. A discussion paper of 13 January 2026 had proposed that only large co-operative credit societies, with at least ₹300 crore of capital and ten years of operation, should be eligible. Why it matters for the exam: licensing had been frozen since 2004.
- 25 May 2026: cooling-off for co-op directors. Final amendment directions for UCBs and rural co-operative banks introduced a cooling-off period for directors who complete a continuous ten-year tenure on a board. They give effect to Section 10A(2A)(i) read with Section 56 of the Banking Regulation Act. Why it matters for the exam: the Banking Laws (Amendment) Act, 2025 raised the maximum tenure of co-operative bank directors from 8 to 10 years.
- 19 May 2026: Yashwant Co-operative Bank licence cancelled. The RBI cancelled the licence of The Yashwant Co-operative Bank, Phaltan (Maharashtra), because it lacked adequate capital and earning prospects. About 99.02% of its depositors were entitled to be paid in full by the DICGC, which had already paid ₹106.96 crore. Why it matters for the exam: licence cancellations are almost always of small co-operative banks, and the ₹5 lakh insurance limit protects most depositors.
- 28 Apr 2026: Mission SAKSHAM. The Governor launched Mission SAKSHAM (Sahkari Bank Kshamta Nirman), a mission-mode training programme for UCBs covering about 1.40 lakh participants: board members, senior managers, risk, compliance and audit heads, and IT staff. Why it matters for the exam: the name and the expansion of the acronym are standard current-affairs questions.
- 15 Mar 2026: Parliamentary panel backs RRB IPOs. The Standing Committee on Finance, chaired by Bhartruhari Mahtab, urged the government to guide highly profitable RRBs towards initial public offerings. It noted that consolidation had cut RRBs from 43 to 28 and that no further capital infusion was needed in 2026-27. Why it matters for the exam: the 2015 amendment to the RRB Act made such listings legally possible.
- 1 Nov 2025: Ombudsman cover for rural co-op banks. The Reserve Bank–Integrated Ombudsman Scheme was extended to state co-operative banks and district central co-operative banks, which had earlier been handled by NABARD. Why it matters for the exam: RRBs and UCBs were already covered, so customers of StCBs and DCCBs can now go to the RBI Ombudsman as well.
Co-operative banks: what makes them different
A co-operative bank is a co-operative society that has a banking licence. Its shareholders are its members, who are usually also its depositors and borrowers. Three features set it apart from a company-owned bank:
- One member, one vote. A member with 1,000 shares has the same vote as a member with one share, so outside investors have little reason to put in large sums of capital.
- Shares at face value. Members join and leave at the face value of their shares. There is no market price and no capital gain, which again makes it hard to raise capital.
- Two sets of law. The society is registered under a state Co-operative Societies Act (or the Multi-State Co-operative Societies Act, 2002), while its banking business falls under the Banking Regulation Act, 1949, which applies to co-operative banks through Section 56.
The RBI's January 2026 discussion paper named these features as reasons why co-operative banks struggle to raise growth capital and to resolve weak banks.
The structure
The co-operative banking sector has two parts: urban co-operative banks and rural credit co-operatives (RCCs). The consolidated assets of the whole co-operative sector were ₹24.5 lakh crore at end-March 2024. RCCs held 71.2% of this, short-term co-operatives alone 68.6%.
Urban co-operative banks (UCBs), also called primary (urban) co-operative banks, serve towns and cities. There were 1,457 at end-March 2025, down from 1,926 in March 2004. The DICGC counted 1,440 on 31 March 2026. UCBs are either scheduled or non-scheduled, and either single-state or multi-state.
Rural credit co-operatives come in two chains.
| Chain | Level | Institution | Number |
|---|---|---|---|
| Short-term (crop loans, working capital) | State | State co-operative bank (StCB) | 34 (Mar 2025) |
| District | District central co-operative bank (DCCB) | 351 (Mar 2025) | |
| Village | Primary agricultural credit society (PACS) | 1,07,641 (Mar 2024) | |
| Long-term (land development, irrigation, machinery) | State | State co-operative agriculture and rural development bank (SCARDB) | 13 (Mar 2024) |
| District or taluka | Primary co-operative agriculture and rural development bank (PCARDB) | 609 (Mar 2024) |
The short-term chain is the famous three-tier structure. A farmer borrows from the PACS of the village. The PACS borrows from the DCCB, the DCCB from the StCB, and the StCB gets refinance from NABARD. The long-term chain, the old "land development banks", now works in only 13 states and union territories, sometimes through a single state-level bank with its own branches (a unitary structure) and sometimes through SCARDBs and PCARDBs together (a federal structure).
Only some of these are banks in law. StCBs, DCCBs and UCBs hold banking licences. PACS, SCARDBs and PCARDBs are outside the Banking Regulation Act, and PACS may not use the words "bank", "banker" or "banking" in their names.
How the tiers perform
The RBI's Trend and Progress report for 2024-25 shows a clear pattern: health gets worse as you move down the rural chain, and the long-term chain is the weakest.
| Institution | GNPA ratio | Other indicators |
|---|---|---|
| StCBs | 4.8% (Mar 2025) | CRAR 13.6%; 32 of 34 profitable in 2024-25 |
| DCCBs | 8.7% (Mar 2025) | CRAR about 12%; 50 of 351 made losses; 38 below the 9% CRAR minimum |
| PACS | 26.2% (Mar 2024) | 37,662 loss-making; overall net loss of ₹915 crore in 2023-24 |
| SCARDBs | 38.3% (Mar 2024) | Recovery-to-demand ratio 40.8% |
| PCARDBs | 38.6% (Mar 2024) | Net loss of ₹201 crore in 2023-24 |
| UCBs | 6.2% (Mar 2025) | CRAR 18.0%; net NPA 0.7%; RoA 0.74% |
The co-operatives' share of farm credit is shrinking. Rural credit co-operatives supplied 9.0% of credit flow to agriculture in 2024-25, down from 13.1% in 2021-22. RRBs supplied 10.8% and commercial banks 80.2%.
Working with the numbers. PACS had 16.37 crore members and 4.95 crore borrowers at end-March 2024. The borrower-to-member ratio is 4.95 ÷ 16.37 = 30.2%, so fewer than one member in three actually had a loan from the society. The RBI reports the same 30.2%.
Dual control
Co-operative banks were brought under the Banking Regulation Act from 1 March 1966 (see the history of the RBI). From then on they lived under dual control:
- The RBI controlled banking functions: licences, branches, CRR and SLR, capital adequacy, interest rates, exposure limits and inspection.
- The Registrar of Co-operative Societies (RCS) of the state, or the Central Registrar (CRCS) for multi-state societies, controlled the society: registration, bye-laws, elections, management and board matters, audit and winding up.
Dual control left a gap. The RBI could see a problem in a bank but could not remove its board, which was elected under state law and protected by the Registrar. Boards were often linked to local politics, and loans to directors and their associates were a recurring cause of failure. When a bank failed, the RBI cancelled its licence, but the Registrar had to appoint the liquidator.
The 2020 amendment
The collapse of PMC Bank in 2019 (below) forced a change. The Banking Regulation (Amendment) Act, 2020 began as an ordinance of 26 June 2020. It applied to UCBs from that date and to StCBs and DCCBs from 1 April 2021. Its main provisions:
- Capital. Co-operative banks may issue equity, preference or special shares, at face value or at a premium, to members or to other people living in their area of operation, and unsecured debentures or bonds of ten years or more, with the RBI's prior approval.
- Boards. The RBI may supersede the board of a co-operative bank registered with a state Registrar, after consulting the state government. Earlier it could do this only for multi-state banks.
- Management. The RBI's approval is needed to appoint the chief executive, and it may set qualifications for board members.
- Resolution. The RBI may prepare a scheme to reconstruct or amalgamate a co-operative bank without first placing it under a moratorium.
- Scope. PACS and co-operative societies whose main business is long-term agricultural finance are excluded, so the SCARDBs and PCARDBs stay outside.
Registration, elections and liquidation still sit with the Registrar, so dual control was narrowed, not ended. The Banking Laws (Amendment) Act, 2025 (assent 15 April 2025) added a longer maximum tenure of 10 years for co-operative bank directors other than the chairperson and whole-time directors.
Failures and why they happen
Madhavpura Mercantile Co-operative Bank (Gujarat) collapsed in 2001 after lending heavily to the stockbroker Ketan Parekh, and its failure spread to other co-operative banks in Gujarat. It was a direct cause of the RBI's caution about new UCBs.
Punjab and Maharashtra Co-operative (PMC) Bank was the turning point. It had hidden loans of about ₹6,226 crore to the HDIL group, roughly 73% of its loan book, behind thousands of dummy accounts. The RBI imposed directions on 23 September 2019, at first capping withdrawals at ₹1,000. PMC Bank was finally taken over by the new Unity Small Finance Bank from 25 January 2022. The details are in Part 15.
Smaller failures continue. In February 2025 the RBI placed New India Co-operative Bank, Mumbai, under all-inclusive directions after an alleged misappropriation of funds and superseded its board; the bank was removed from the Second Schedule to the RBI Act by a notification of 6 January 2026. In 2026 alone the RBI cancelled the licences of, among others, Indian Mercantile Co-operative Bank, Lucknow (February), Sarvodaya Co-operative Bank, Mumbai (May), The Yashwant Co-operative Bank, Phaltan (May) and Shree Mahalaxmi Urban Co-operative Credit Bank, Gokak (June).
The RBI's own analysis shows a pattern:
- Since 2020-21, the licences of 57 UCBs have been cancelled. All were in Tiers 1 to 3, mostly non-scheduled.
- At the start of 2026, 82 UCBs were classed as weak: 28 under all-inclusive directions, 32 under prompt corrective action and 22 under the supervisory action framework.
- Most failures involved governance failure or management fraud in small banks.
- Of the 823 UCB licences issued between May 1993 and June 2001, about 31% became financially unsound within a short time. That is why licensing was suspended in June 2004.
The RBI's response since 2004 has been consolidation: 163 mergers of UCBs up to 2024-25, more than half of them in Maharashtra, plus closure of non-viable banks. When a bank does fail, the DICGC pays each depositor up to ₹5 lakh. Part 29, why banks fail, compares these failures with those of commercial banks.
The four-tier framework for UCBs
On the advice of an Expert Committee chaired by N. S. Vishwanathan (2021), the RBI adopted a four-tier regulatory framework for UCBs on 1 December 2022. The tiers are set by deposit size. Small banks get lighter rules, while large ones face rules closer to those for commercial banks. The tier also decides housing-loan limits, branch expansion and whether the PCA framework applies (it covers Tiers 2 to 4).
| Tier | Deposits | Banks (Mar 2025) | Share of UCB deposits | Minimum CRAR |
|---|---|---|---|---|
| Tier 1 | Below ₹100 crore (and all unit and salary earners' UCBs) | 838 | 11.3% | 9% |
| Tier 2 | ₹100 crore to ₹1,000 crore | 535 | 30.5% | 12% |
| Tier 3 | ₹1,000 crore to ₹10,000 crore | 78 | 34.4% | 12% |
| Tier 4 | ₹10,000 crore and above | 6 | 23.8% | 12% |
Working with the numbers. Tier 1 banks held deposits of ₹65,760 crore across 838 banks, an average of ₹65,760 ÷ 838 = ₹78.5 crore each. Tier 4 banks held ₹1,38,910 crore across six banks, an average of ₹23,152 crore each, roughly 295 times the Tier 1 average. Tiers 3 and 4 together are 78 + 6 = 84 banks, or 84 ÷ 1,457 = 5.8% of all UCBs, but they hold 34.4% + 23.8% = 58.2% of deposits. That is why one framework cannot fit all of them.
The umbrella organisation and other support
Small UCBs cannot afford modern technology or easily raise capital. The idea of an umbrella organisation, first put forward in 2004-05, finally took shape as the National Urban Co-operative Finance and Development Corporation (NUCFDC), which became functional in February 2024. It is registered with the RBI as an NBFC and offers UCBs shared technology, liquidity and fund-management support and capacity building. The Vishwanathan committee had said new UCB licences should wait until the umbrella organisation was working well.
For rural co-operative banks, the RBI approved in April 2025 a shared service entity, Sahakar Sarathi Private Limited, which NABARD is setting up with the Ministry of Cooperation to provide central technology and operations support.
Licensing reopens
The January 2026 discussion paper on licensing, and the August 2026 draft guidelines that followed it, propose a narrow entry gate. Only well-run co-operative credit societies could apply, with:
- a minimum capital of ₹300 crore on 31 March of the previous year (the same figure that applies to new small finance banks);
- at least ten years of operation and a good financial record;
- a CRAR of at least 12% and a net NPA ratio of no more than 3% when the licence is granted;
- priority, at first, for multi-state societies.
Earlier committees had proposed much lower bars: the Malegam Committee (2011) suggested capital of ₹0.5 crore to ₹5 crore, and the R. Gandhi High Powered Committee (2015) ₹25 crore to ₹100 crore with a five-year track record. The ₹300 crore figure shows how much the RBI's thinking has changed. Compare the entry rules for SFBs in Part 33, small finance and payments banks.
The Ministry of Cooperation and PACS reform
The Union government created a separate Ministry of Cooperation on 6 July 2021, carved out of the agriculture ministry. Amit Shah has been its minister from the start, and its slogan is "Sahkar se Samriddhi" (prosperity through co-operation). Its main steps for co-operative credit:
- Computerisation of PACS. A centrally sponsored scheme with an outlay of ₹2,516 crore, running from 2022-23 to 2026-27, puts PACS on a common enterprise resource planning (ERP) software linked to DCCBs and StCBs. The RBI says it aims to bring nearly 80,000 PACS onto the platform.
- Model bye-laws for PACS, circulated to the states, let PACS take on more than 25 kinds of business, such as dairy, fisheries, godowns, LPG and fuel outlets, fair price shops and common service centres.
- A plan to set up 2 lakh new multipurpose PACS, dairy and fishery co-operatives in five years.
- The National Cooperation Policy, 2025, released on 24 July 2025.
Because co-operation is a state subject (Entry 32 of the State List), the Union can only persuade the states through model bye-laws and funding. The microfinance and financial inclusion part covers the other channels of rural credit.
Regional rural banks
Origins
In 1975 a Working Group on Rural Banks, chaired by M. Narasimham, recommended a new type of bank that would combine the local feel of a co-operative with the professional management of a commercial bank. The Regional Rural Banks Ordinance was issued on 26 September 1975, and five RRBs began work on 2 October 1975. The best known of them is Prathama Bank, Moradabad (Uttar Pradesh), sponsored by Syndicate Bank. The ordinance was replaced by the Regional Rural Banks Act, 1976.
RRBs were meant to lend to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs. They have a priority sector lending target of 75% of adjusted net bank credit, against 40% for commercial banks (see priority sector lending). In 2025-26 their average achievement was 91.7%.
Ownership and control
The issued capital of an RRB is held in a fixed ratio:
| Shareholder | Share |
|---|---|
| Central government | 50% |
| Sponsor bank (usually a public sector bank) | 35% |
| State government | 15% |
The sponsor bank appoints the chairman, provides staff and technology and is expected to "handhold" the RRB. The RBI regulates RRBs and NABARD supervises them. RRBs are scheduled commercial banks, but several RBI rules treat them separately: they are left out of the revised Basel III framework that applies to other commercial banks, and they are not eligible for the Marginal Standing Facility.
The RRB (Amendment) Act, 2015 (passed by Lok Sabha in December 2014 and Rajya Sabha on 28 April 2015) changed four things:
- the authorised capital of each RRB rose from ₹5 crore to ₹2,000 crore;
- RRBs may raise capital from sources other than the three shareholders, including the public;
- after any such issue, the Centre and the sponsor bank together must hold at least 51%;
- directors' terms were extended from two years to three.
Worked example: how much can an RRB sell to the public? Suppose an RRB has issued capital of ₹1,000 crore, held as ₹500 crore (Centre), ₹350 crore (sponsor bank) and ₹150 crore (state). The Centre and the sponsor together hold ₹850 crore. If the RRB issues new shares worth X to the public, the 51% rule requires:
850 ÷ (1,000 + X) ≥ 0.51, so 1,000 + X ≤ 850 ÷ 0.51 = 1,666.7, so X ≤ ₹666.7 crore.
After a full issue of ₹666.7 crore, the public would hold 666.7 ÷ 1,666.7 = 40%, the Centre 30%, the sponsor 21% and the state 9%. The state's share would fall below 15%, which the amended Act allows only after the Centre consults the state government.
Amalgamation: from 196 to 28
RRBs grew quickly: by the early 2000s there were 196. Many were too small to be viable, lent to too narrow an area and made losses. Consolidation began in 2004-05 and ran in four phases, each carried out by the Centre under Section 23A of the RRB Act after consulting NABARD, the sponsor banks and the state governments.
| Phase | Period | RRBs |
|---|---|---|
| Phase 1 | FY2006 to FY2010 | 196 → 82 |
| Phase 2 | FY2013 to FY2015 | 82 → 56 |
| Phase 3 | up to 2020 | 56 → 43 |
| Phase 4: One State, One RRB | effective 1 May 2025 | 43 → 28 |
In the fourth phase, under the principle of "One State, One RRB", 26 RRBs in 11 states and union territories were merged into 11, so the total fell by 15, from 43 to 28. The gazette notification is dated 5 April 2025. Andhra Pradesh merged four RRBs into one (Andhra Pradesh Grameena Bank, sponsored by Union Bank of India), Uttar Pradesh and West Bengal three each, and Bihar, Gujarat, Jammu and Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan two each. Each new RRB has authorised capital of ₹2,000 crore. The RBI added the new banks to the Second Schedule of the RBI Act in notifications of October 2025 and January 2026, and the Finance Ministry unveiled a common logo for all 28 RRBs on 18 December 2025.
Today the 28 RRBs work through 22,273 branches in 26 states and 3 union territories, covering about 700 districts. More than 92% of their branches are in rural or semi-urban areas.
The merger logic is simple. One RRB per state ends competition between RRBs sponsored by different banks in the same state, spreads fixed costs such as IT over a larger business, and gives each bank a capital base big enough to absorb losses. The cost is that an RRB covering a whole state is less "regional" than the district-level banks of 1975. Part 38, bank mergers and consolidation, compares this with the public sector bank mergers of 2017–2020.
Recapitalisation and the turnaround
RRBs needed repeated help from their owners. In 2010 the K. C. Chakrabarty Committee recommended raising RRBs' CRAR to 9% by 2012, and ₹2,200 crore was earmarked for 40 of the then 82 RRBs. A larger round followed after the Covid shock: the Centre decided to put ₹10,890 crore into RRBs in 2021-22 and 2022-23, of which its own 50% share was ₹5,445 crore; the sponsor banks and states paid the rest in proportion. The number of loss-making RRBs fell from 18 in FY2020 to three in FY2024.
The results since then:
| Year | Net profit (₹ crore) | Gross NPA | CRAR |
|---|---|---|---|
| 2022-23 | 4,974 | 7.3% | 13.4% |
| 2023-24 | 7,571 | 6.1% | 14.2% |
| 2024-25 | 6,820 | 5.4% | 14.4% |
| 2025-26 | 10,176 | 5.3% | 15.0% |
Working with the numbers. Net profit rose from ₹6,820 crore to ₹10,176 crore, an increase of ₹3,356 crore, or 3,356 ÷ 6,820 = 49.2%. Loans outstanding of ₹5,78,349 crore against deposits of ₹7,68,621 crore give a credit-deposit ratio of 5,78,349 ÷ 7,68,621 = 75.2%, matching the official figure. Net worth rose from ₹56,780 crore in 2023-24 to ₹74,086 crore in 2025-26.
Profit dipped in 2024-25, the year of the last round of mergers, before rising to a record. Weak spots remain: the Standing Committee on Finance pointed to a 13.8% gross NPA ratio on RRBs' education loans.
Listing plans
Better profits have revived the idea of listing RRBs on the stock exchanges. Under the Finance Ministry's 2022 draft criteria, an RRB considered for an IPO should have a net worth of at least ₹300 crore, a CRAR above the 9% minimum in each of the three previous years, an operating profit before tax of at least ₹15 crore in three of the previous five years, a return on equity of 10% and a return on assets of 0.5% in three of five years, and must not be under PCA. In May 2025 the government was reported to be planning to list at least five RRBs by the end of 2026-27. In March 2026 the Standing Committee on Finance urged it to move ahead. No RRB had listed by October 2026.
Co-operative banks and RRBs compared
| Urban co-operative bank | Rural co-operative bank (StCB, DCCB) | Regional rural bank | |
|---|---|---|---|
| Owned by | Members | Member societies | Centre 50%, sponsor bank 35%, state 15% |
| Set up under | State or multi-state co-operative law | State co-operative law | RRB Act, 1976 |
| Regulated by | RBI | RBI | RBI |
| Supervised by | RBI | NABARD | NABARD |
| Society matters | Registrar (RCS/CRCS) | Registrar (RCS) | Not applicable |
| Number (31 Mar 2026, DICGC) | 1,440 | 34 StCBs, 352 DCCBs | 28 |
| Main weakness | Governance in small banks | Losses in lower tiers | Past losses, now recovering |
Common exam traps
- Ownership order. It is Centre 50, sponsor bank 35, state 15. The sponsor bank's share is larger than the state's.
- Who supervises whom. The RBI supervises UCBs. NABARD supervises StCBs, DCCBs and RRBs, though the RBI regulates them all.
- PACS are not banks. PACS, SCARDBs and PCARDBs are outside the Banking Regulation Act, even after the 2020 amendment.
- Two dates for the 2020 amendment. UCBs from 26 June 2020, rural co-operative banks from 1 April 2021.
- One State, One RRB. 26 RRBs were merged into 11, so the total fell by 15, from 43 to 28. Do not confuse the 26 merged banks with the 28 remaining banks.
- First RRB. Prathama Bank, Moradabad, sponsored by Syndicate Bank, on 2 October 1975, not 1976. The Act came in 1976.
- Narasimham. The 1975 Working Group on Rural Banks, not the Narasimham Committees on the financial system of 1991 and 1998.
- UCB licences. Frozen since 2004, not since the PMC failure of 2019.
Key facts at a glance
| Co-operative banks under BR Act | Since 1 March 1966 (Section 56) |
| BR (Amendment) Act 2020 | UCBs from 26 June 2020; StCBs and DCCBs from 1 April 2021 |
| Insured co-operative banks, 31 Mar 2026 | 1,826: 1,440 UCBs, 34 StCBs, 352 DCCBs |
| UCBs, end-March 2025 | 1,457 (838 Tier 1, 535 Tier 2, 78 Tier 3, 6 Tier 4); 1,926 in March 2004 |
| Four-tier UCB framework | 1 December 2022; N. S. Vishwanathan committee |
| UCB minimum CRAR | 9% Tier 1; 12% Tiers 2–4 |
| UCB licensing | Paused June 2004; discussion paper 13 Jan 2026; draft on-tap guidelines 5 Aug 2026 |
| Umbrella organisation | NUCFDC, functional since February 2024 |
| PACS | 1,07,641 (Mar 2024); 16.37 crore members; GNPA 26.2% |
| Ministry of Cooperation | Created 6 July 2021; minister Amit Shah |
| PACS computerisation | ₹2,516 crore; 2022-23 to 2026-27 |
| First RRBs | 2 October 1975; Prathama Bank, Moradabad (Syndicate Bank) |
| RRB law | RRB Act, 1976; amended 2015 (authorised capital ₹2,000 crore, 51% rule) |
| RRB ownership | Centre 50%, sponsor bank 35%, state 15% |
| RRB count | 196 → 82 → 56 → 43 → 28 (from 1 May 2025) |
| RRB results 2025-26 | Net profit ₹10,176 crore; GNPA 5.3%; CRAR 15.0%; CD ratio 75.2% |
| RRB network | 22,273 branches, 26 states and 3 UTs, about 700 districts |
Exam corner: what to remember
- Co-operative banks are societies with banking licences; the BR Act applies to them through Section 56.
- The short-term rural chain is StCB → DCCB → PACS; the long-term chain is SCARDB → PCARDB.
- Dual control: the RBI controls banking, the Registrar controls the society. The 2020 amendment let the RBI supersede boards, approve CEOs, approve share issues and merge banks without a moratorium.
- PMC Bank (September 2019) triggered the 2020 amendment and was absorbed by Unity SFB in January 2022.
- UCB tiers are set by deposits: ₹100 crore, ₹1,000 crore and ₹10,000 crore are the boundaries.
- Mission SAKSHAM (28 April 2026) is RBI capacity building for UCBs; NUCFDC is their umbrella organisation; Sahakar Sarathi serves rural co-op banks.
- RRBs: Narasimham Working Group (1975), RRB Act 1976, 50:35:15, regulated by the RBI, supervised by NABARD, PSL target 75%.
- One State, One RRB: 43 → 28 from 1 May 2025.
- RRBs earned a record ₹10,176 crore in 2025-26, with GNPA at 5.3%.
Test yourself
Which of these is outside the scope of the Banking Regulation Act, 1949?
Show answer
Answer: (c) PACS, SCARDBs and PCARDBs are excluded; StCBs, DCCBs and UCBs hold banking licences.
The shareholding of a regional rural bank is split between the Centre, the sponsor bank and the state government in the ratio:
Show answer
Answer: (b) The Centre holds 50%, the sponsor bank 35% and the state government 15%.
Under "One State, One RRB", effective 1 May 2025, the number of RRBs fell from 43 to:
Show answer
Answer: (c) 26 RRBs in 11 states and union territories were merged into 11, leaving 28.
(Current affairs) What was the consolidated net profit of RRBs in 2025-26, reported in August 2026?
Show answer
Answer: (d) ₹10,176 crore, a record; ₹6,820 crore was the 2024-25 figure and ₹7,720 crore the nine-month figure for 2025-26.
(Current affairs) Mission SAKSHAM, launched by the RBI in April 2026, is:
Show answer
Answer: (b) It is a mission-mode training programme for UCBs covering about 1.40 lakh participants.
(Numerical) An RRB has issued capital of ₹1,000 crore held 50:35:15. What is the most it can raise from the public without the Centre and sponsor bank together falling below 51%?
Show answer
Answer: (c) 850 ÷ (1,000 + X) ≥ 0.51 gives X ≤ ₹666.7 crore.
(Numerical) RRBs' net profit rose from ₹6,820 crore in 2024-25 to ₹10,176 crore in 2025-26. The growth rate is about:
Show answer
Answer: (c) (10,176 − 6,820) ÷ 6,820 = 3,356 ÷ 6,820 = 49.2%.
Under the four-tier framework, the minimum CRAR for a Tier 1 urban co-operative bank is:
Show answer
Answer: (a) Tier 1 UCBs need 9%; Tiers 2, 3 and 4 need 12%.
The Banking Regulation (Amendment) Act, 2020 applied to state and district central co-operative banks from:
Show answer
Answer: (c) It applied to UCBs from 26 June 2020 and to rural co-operative banks from 1 April 2021.
Prathama Bank, Moradabad, usually cited as India's first regional rural bank, was sponsored by:
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Answer: (d) It opened on 2 October 1975, one of the first five RRBs, with Syndicate Bank as sponsor.
Further reading
- RBI, Report on Trend and Progress of Banking in India 2024-25, Chapter V: Co-operative Banks: the best single source on UCBs, StCBs, DCCBs, PACS and the long-term structure, with tables for every tier.
- RBI, Discussion Paper on Licensing of Urban Co-operative Banks (January 2026): a short paper that sets out the case for and against new UCB licences and the history of failures.
- RBI press release on draft on-tap UCB licensing guidelines, 5 August 2026: the starting point for the new licensing regime.
- PRS Legislative Research, The Banking Regulation (Amendment) Bill, 2020: a clear summary of what changed for co-operative banks.
- PRS Legislative Research, The Regional Rural Banks (Amendment) Bill, 2014: the 2015 changes to RRB capital and ownership.
- PIB, review of RRB performance, 25 August 2026: the latest official figures for RRBs.
- Ministry of Finance, Consolidated Review of RRBs 2021-22: the government's own account of the recapitalisation and turnaround.
Sources
- RBI, Trend and Progress of Banking in India 2024-25, Chapter V: co-operative structure; ₹24.5 lakh crore assets; UCBs 1,926 (2004) to 1,457 (2025); 163 mergers; 57 cancellations since 2020-21; four-tier table V.1; StCB, DCCB, PACS, SCARDB and PCARDB numbers, GNPA, CRAR and profits (Table V.12); share in agricultural credit (Table V.11); PACS members and borrowers; PACS computerisation and 2 lakh PACS plan; Sahakar Sarathi; Ombudsman extension from 1 November 2025 (accessed 24 October 2026)
- RBI, Discussion Paper on Licensing of UCBs, January 2026: 823 licences in 1993–2001, 31% unsound, pause in June 2004; tier boundaries; NUCFDC functional since February 2024; 82 weak UCBs; UCB CRAR 18.0%, GNPA 6.2%, NNPA 0.7%, RoA 0.74%; Malegam, R. Gandhi and Vishwanathan committees; ₹300 crore capital and 10-year proposals (accessed 24 October 2026)
- RBI press release, 13 January 2026: discussion paper on UCB licensing, comments till 13 February 2026 (accessed 24 October 2026)
- RBI, Statement on Developmental and Regulatory Policies, 5 August 2026: decision to resume on-tap UCB licensing; review of concentration risk rules for rural co-operative banks (accessed 24 October 2026)
- RBI press release, 5 August 2026: draft on-tap licensing guidelines, comments till 5 September 2026 (accessed 24 October 2026)
- GKToday, August 2026 and Drishti IAS: eligibility conditions in the draft guidelines (10 years, ₹300 crore, CRAR 12%, NNPA 3%, multi-state priority) (accessed 24 October 2026)
- RBI, Statement on Developmental and Regulatory Policies, 1 October 2025: UCB licensing paused since 2004; StCBs and DCCBs to be brought under the RBI Ombudsman scheme (accessed 24 October 2026)
- RBI press release, 2 September 2026: third Conference of Registrars of Cooperative Societies (accessed 24 October 2026)
- RBI press release, 25 May 2026: cooling-off period for co-operative bank directors after ten years (accessed 24 October 2026)
- RBI press release, 19 May 2026: licence of The Yashwant Co-operative Bank cancelled; 99.02% of depositors fully covered; ₹106.96 crore paid (accessed 24 October 2026)
- RBI press release, 28 April 2026: Mission SAKSHAM, 1.40 lakh participants (accessed 24 October 2026)
- RBI press releases on licence cancellations: Indian Mercantile Co-operative Bank, 13 February 2026, Sarvodaya Co-operative Bank, 12 May 2026, Shree Mahalaxmi Urban Co-operative Credit Bank, 18 June 2026; and New India Co-operative Bank excluded from the Second Schedule, 18 February 2026 (accessed 24 October 2026)
- RBI press releases on RRBs in the Second Schedule, 2 December 2025 and 6 February 2026: merged RRBs included and erstwhile RRBs excluded (accessed 24 October 2026)
- PIB, 25 August 2026: RRB net profit ₹10,176 crore (2025-26) and ₹6,820 crore (2024-25); GNPA 5.3%, NNPA 2.1%; 22,273 branches; 26 states and 3 UTs; CD ratio 75.2%; 54.98 lakh PMJDY accounts (accessed 24 October 2026)
- PSU Connect, 28 July 2026: Rajya Sabha reply with RRB deposits, loans, GNPA, NNPA, CRAR and net worth for 2023-24 to 2025-26 (accessed 24 October 2026)
- Business Standard (PTI), 15 March 2026: Standing Committee on Finance on RRB IPOs; four consolidation phases (196 → 82 → 56 → 43 → 28); notification of 5 April 2025; 50:35:15 and the 51% rule; 13.8% GNPA on education loans (accessed 24 October 2026)
- Business Standard, 16 May 2025: plan to list five RRBs by FY27; 2022 draft IPO criteria; loss-making RRBs 18 in FY20 to 3 in FY24 (accessed 24 October 2026)
- Business Standard (PTI), 18 December 2025: common logo for the 28 RRBs (accessed 24 October 2026)
- The Week (PTI), April 2025: One State, One RRB: 26 RRBs into 11, state-wise mergers, ₹2,000 crore authorised capital, Section 23A (accessed 24 October 2026)
- Business Standard, 25 March 2025: RRB profit ₹7,571 crore, GNPA 6.1% and CRAR 14.2% in 2023-24 (accessed 24 October 2026)
- NABARD, Key Statistics of RRBs 2022-23: RRB profit ₹4,974 crore, GNPA 7.28% and CRAR 13.43% in 2022-23 (accessed 24 October 2026)
- Ministry of Finance, Consolidated Review of RRBs 2021-22: recapitalisation of ₹10,890 crore in 2021-22 and 2022-23, Centre's share ₹5,445 crore (accessed 24 October 2026)
- PRS Legislative Research, RRB (Amendment) Bill, 2014 and Banking Regulation (Amendment) Bill, 2020: provisions of the two amendments (accessed 24 October 2026)
- Wikipedia, Regional rural bank: ordinance of 26 September 1975; five RRBs on 2 October 1975; Prathama Bank; Chakrabarty committee and ₹2,200 crore; 43 RRBs in April 2020 (accessed 24 October 2026)
- PIB, 6 July 2021 and SahkarNet, December 2025: creation of the Ministry of Cooperation; PACS computerisation outlay of ₹2,516 crore; model bye-laws; National Cooperation Policy of 24 July 2025 (accessed 24 October 2026)
- Part 15: The RBI and financial stability and Part 18: RBI regulation of banks and NBFCs: PMC Bank details; 2020 and 2025 amendments; DICGC bank counts on 31 March 2026 (accessed 24 October 2026)