RBI issued new regulations for Urban Cooperative Bank directors effective May 25, 2026. Directors cannot serve continuously for more than 10 years and must undergo a mandatory 3-year cooling-off period before re-appointment. The amendment addresses circumvention practices where directors briefly resigned and got re-elected to extend tenure beyond legal limits. Similar directions issued for Rural Cooperative Banks. During cooling-off, directors can only remain as members/customers.

The RBI's amendment to UCB governance directions tackles a significant regulatory loophole that undermined board independence and governance standards. Directors were gaming the system by resigning momentarily and getting re-elected, effectively serving indefinitely on UCB boards. This practice concentrated power, reduced fresh perspectives, and potentially compromised decision-making quality. The 10-year continuous tenure cap with mandatory 3-year cooling-off ensures board rotation, bringing new ideas while preventing entrenchment. The policy applies to all appointment methods - election, co-option, or otherwise. Directors can serve other banks during cooling-off, maintaining their expertise in the cooperative banking sector. This aligns with broader RBI efforts to strengthen cooperative bank governance following past failures and frauds. UCBs serve urban areas with significant deposit bases, making governance critical for financial stability. The immediate implementation signals RBI's urgency in addressing governance gaps. Similar directions for RCBs show comprehensive approach to cooperative banking regulation. This enhances depositor protection and systemic stability in the cooperative banking sector.