Reserve Bank of India (Urban Co-operative Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)

1. Other business for UCBs

This document sets what other business the lender may take on.

2. In force at once

The rules took effect the day they were issued. There was no grace period.

3. Who is covered

These Directions apply to every urban co-operative bank.

4. What a UCB means here

An urban co-operative bank here means a primary co-operative bank under the Act.

1. Board resolution for insurance

A Board resolution is needed before insurance agency work without risk begins.

2. Board clears referral contracts

The Board must approve any contract with an insurer for referral business.

3. Board resolution for funds

A Board resolution is needed before mutual fund business begins.

4. Board clears dealer licence

A Board resolution is needed before applying for a foreign exchange dealer licence.

5. Policy on card terminals

A full policy on card acquiring and complaints is needed before terminals are put out.

6. Complaints policy comes first

A detailed complaints policy with an escalation ladder must exist beforehand.

7. Policy must cover funds

The investment policy must carry provisions on investing in such funds.

BankPulse example. A lender that has never invested in such a fund still needs the words in its investment policy. The policy must carry provisions governing its investments in a scheme of that kind. Writing them only when the first investment is proposed is too late.

8. Ten per cent alone

A lender alone cannot put more than ten per cent into an alternative investment fund.

9. Twenty per cent from all

All regulated lenders together cannot hold more than twenty per cent of a fund.

10. Subordinated units deducted

A holding in subordinated units of such a fund is deducted from capital in full.

BankPulse example. A lender puts ₹10 crore into such a fund, as subordinated units. The whole ₹10 crore comes off capital funds. It is taken proportionately from Tier-1 and Tier-2 capital.

11. Some funds are exempt

The Reserve Bank may exempt named funds from these rules by notification.

1. No promised return

Mutual fund units are bought at the customer's risk with no assured return.

2. Not from the market

The lender cannot buy such units on the secondary market or buy them back.

3. Selling only at branches

Mutual fund units may be distributed only at the bank's branches.

4. KYC rules still apply

The know your customer and money laundering rules apply to these applicants too.

5. Tell the customer the fee

Every commission or fee received from the product company must be disclosed.

6. No approval for referral

Prior approval is not needed to take up referral business.

7. No new money changers

No fresh authorisation will be given to an urban co-operative bank as a money changer.

8. Pension work through Pravaah

An application to act as a pension point of presence goes through Pravaah.

9. Follow the pension regulator

A bank acting as a point of presence must follow the pension regulator's instructions.

10. Card rules still apply

The payments department's rules on card acquiring and terminals apply as well.

11. Own terminals need approval

Putting out its own card terminals needs an application through Pravaah.

12. Prepaid needs own ATMs

A bank issuing prepaid instruments must have its own ATM network.

13. Prepaid follows payment rules

Prepaid instruments must meet the payments department's eligibility rules.

1. Old rules stay repealed

Rules repealed before this document was issued remain repealed.

2. Past acts still stand

Anything done under the old rules is still judged by the old rules.

3. Old approvals carry over

Approvals given under the repealed rules are now read under these rules.

4. Added to other law

These rules sit on top of every other law and rule already in force.