Notification No. G.S.R. 891(E)., Dated 10.12.2025
1. Overview
The Central Government has notified amendments to the Banking Regulation (Co-operative Societies) Rules, 1966, introducing new definitions, procedures, and revised forms to strengthen governance and streamline the removal and cessation process for directors in co-operative banks.
2. Insertion of Definition – “Ineligible Director”
A new definition of “ineligible director” has been inserted into the Rules.
2.1 Purpose of the Definition
- Establishes a clear statutory basis for identifying directors who no longer meet eligibility criteria.
- Prevents individuals who fail to satisfy prescribed fit-and-proper norms from continuing in office.
- Supports enhanced governance, transparency, and accountability within co-operative banking institutions.
The definition will be central to determining which directors are liable for removal or cessation under the revised rules.
3. New Rule 5-A – Procedure for Determination and Drawing of Lots
A new Rule 5-A has been added to lay down detailed procedures for identifying directors who shall cease to hold office or be removed, particularly in situations where:
- The board needs to be reconstituted,
- Excess directors must demit office, or
- Rotation or tenure-based removal is required.
3.1 Key Features of Rule 5-A
1. Grouping of Directors by Tenure
Directors must be grouped based on:
- Length of time in office,
- Eligibility status, and
- Categories specified in the amended rules.
This ensures the removal process is objective and tenure-balanced.
2. Drawing of Lots
If directors need to be removed or rotated out:
- The process shall be conducted by drawing of lots, ensuring fairness and non-discrimination.
- The rules lay out procedural safeguards for conducting the lot-drawing process.
3. Rules for Exclusion
Certain directors may be excluded from the lot, such as:
- Those already identified as ineligible directors,
- Those protected under statutory or regulatory tenure provisions,
- Directors completing defined mandatory terms.
These exclusions maintain compliance integrity and continuity of governance.
4. Amendments to Forms I and IX
The notification also introduces multiple amendments to Form I and Form IX, which relate to:
- Reporting of office-bearer and director details,
- Compliance declarations,
- Eligibility and cessation records.
4.1 Purpose of Amendments
- Align documentation with the new definition of “ineligible director”
- Support proper recording of removal/rotation proceedings
- Enhance auditability and transparency in director appointments and cessation
5. Regulatory Intent
The amendments aim to:
- Improve governance standards in co-operative banks
- Ensure transparent, rule-based removal of directors
- Prevent conflicts of interest or arbitrary selection
- Strengthen prudential oversight and protect depositor interests
- Modernise documentation and procedural compliance
These reforms align co-operative bank governance with contemporary regulatory expectations under the Banking Regulation Act, 1949 (as amended).
6. Implications for Co-operative Banks
Banks must:
- Update internal bylaws and governance policies to reflect the new rules
- Establish systems to determine eligibility and identify “ineligible directors”
- Set up procedures for grouping directors by tenure and conducting lots under Rule 5-A
- Revise internal formats to align with amended Forms I and IX
- Train board secretariat and compliance officers on the updated procedures
Non-compliance could lead to regulatory scrutiny, governance findings, or supervisory directives.
Click Here To Read The Full Notification
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