Reserve Bank of India (Urban Co-operative Banks – Voluntary Amalgamation) Directions, 2025
UR
- Applies toUrban co-operative banks
- StatusIn force
- ImportanceMUST READ
- IssuedNov 28, 2025
- Amendmentsnone tracked
- Length27 points in 5 sections · 3 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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What it says
Chapter I. Preliminary
1. Capital must still hold
The merged bank's capital ratio must meet RBI's minimum after the merger.
2. In force at once
These Directions came into force with immediate effect.
3. Who is covered
These Directions apply to every urban co-operative bank, and cover a merger of two or more of them.
4. Every deposit protected
RBI considers a merger only if the acquiring bank protects every deposit of the other bank.
5. Even a negative net worth
That protection holds even when the other bank's net worth is negative, alone or with upfront state support.
Chapter II. Approval by Board of Directors and Shareholders
Do it
1. Two thirds of every board
Both boards must approve by a two-third majority of ALL board members, not merely those present and voting.
BankPulse example. A board has 12 members. Approval needs 2 of every 3 of them, counting all 12 and not just those present. That is 8 members. If only 9 attend, two-thirds of those 9 would be 6, and 6 is not enough.
2. Due diligence weighed
The boards must weigh whether due diligence was done on the bank being absorbed.
BankPulse example. The board of the acquiring bank asks one question before it votes. Was due diligence undertaken in respect of the entity being absorbed? If nobody can answer, the board is not ready to vote.
3. Board changes lawful twice
Board changes must fit RBI's directions and the co-operative societies law, so far as the two agree.
4. What shareholders receive
The board must weigh what the buying bank will pay the other bank's shareholders.
5. A fair swap ratio
The swap ratio must come from independent valuers and the board must judge it fair and proper.
BankPulse example. The two banks agree a swap ratio. It must come from independent valuers with the required competence and experience. The board must then form its own opinion that the ratio is fair and proper. A ratio the board has not examined does not meet the rule.
6. Impact studied first
The board must study the merger's effect on profit, bad loans, capital and lending limits.
Background
7. No stake limit breached
No one's stake after the swap may breach RBI limits.
8. Books at existing values
The absorbed bank's assets, liabilities and reserves enter the books at their existing values.
9. In person, by value too
Shareholders of each bank approve by two-thirds in number and value, present in person at the meeting.
10. Three weeks of notices
Meeting notices run weekly for three consecutive weeks in at least two local newspapers.
Chapter III. Approval by RBI
1. Then RBI sanctions
After the shareholder vote, the scheme goes to RBI for sanction, with papers through the PRAVAAH portal.
Chapter IV. Sanction of Scheme of Amalgamation
Must know
1. Loss branches may close
As an incentive, RBI may let the acquirer close branches that ran net losses for the last three years.
2. Keeping the forex licence
The acquirer may keep facilities like the authorised dealer licence if it holds 9 per cent capital on RBI's path to 12.
3. Losses spread five years
Taken-over losses may be amortised over at most five years, counting the year of the merger.
4. Goodwill in instalments
Any excess paid over the net assets is goodwill, written off in equal instalments over five years.
Background
5. A dated vesting order
RBI's written order fixes the date the assets and liabilities transfer, and the absorbed bank stands dissolved.
6. The registrar strikes it off
RBI sends the dissolution order to the Registrar of Co-operative Societies, who strikes the bank off the record.
7. Both registrars told
If the two banks answer to different co-operative laws, both registrars receive the order.
8. Crossing a state line
A merger that makes the bank multi-state takes effect only after registration under the multi-state law.
9. Licences can be reused
Closed or merged branch licences may open new branches within the combined area of operation.
10. No fresh entry capital
Becoming multi-state only through the merger does not trigger the multi-state entry capital requirement.
Chapter VI. Repeal and Other Provisions
1. Old rules swept away
The old merger circulars for urban co-operative banks stand repealed.
The same subject for other kinds of institution
The same subject for other kinds of institution.
Other RBI rules for urban co-operative banks
RBI capital adequacy rules for urban co-operative banks 2025
RBI compliance officer and compliance function rules for urban co-operative banks
RBI concurrent audit rules for urban co-operative banks 2026
RBI credit bureau reporting rules for urban co-operative banks 2025
RBI credit card and debit card rules for urban co-operative banks 2025
RBI customer service and fair conduct rules for urban co-operative banks 2025
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