RBI Circular for June 2026

June 5, 2026June 5, 2026 admin 0 Comments banking regulation, circulars, customer protection, cybersecurity, digital payments, governance, KYC compliance, rbi, Risk management

Reserve Bank of India (Rural Co-operative Banks – Governance) Amendment Directions, 2026

May 25, 2026

1. The Reserve Bank had issued Reserve Bank of India (Rural Co-operative Banks – Governance) Directions, 2025 on November 28, 2025. Chapter-II of these directions contain provisions regarding the Constitution of Board.

2. The Banking Regulation (Amendment) Act, 2020 had made Section 10A(2A)(i) of the Banking Regulation Act, 1949 (in short, “the Act”), which prescribed a ceiling on continuous tenure of directors, applicable to State Co-operative Banks (hereinafter collectively referred to as ‘StCBs’ and individually as ‘StCB’) and Central Co-operative Banks (hereinafter collectively referred to as ‘CCBs’ and individually as ‘CCB’). The provision had come into force for StCBs and CCBs with effect from April 1, 2021. This provision was further amended by the Banking Laws (Amendment) Act, 2025 to increase the maximum continuous tenure of directors of StCBs and CCBs from eight years to ten years and the amended provision has come into effect on August 1, 2025.

3. In a few cases, directors have been found to be resorting to certain methods to circumvent the provisions of the Act, such as resigning briefly from office and being re-elected / co-opted to the Board within a short period of time, thereby continuing to be on the Board of an StCB / CCB for an extended period beyond the legally permissible tenure, which defeats the intent and spirit of the statutory provision.

4. Accordingly, in exercise of the powers conferred by Section 35A read with Section 10A(2A)(i) and Section 56 of the Act, and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues these Directions hereinafter specified.

(1) These Directions shall be called the Reserve Bank of India (Rural Co-operative Banks – Governance) Amendment Directions, 2026.

(2) These Directions shall come into force with immediate effect.

(3) These Directions shall modify the Reserve Bank of India (Rural Co-operative Banks – Governance) Directions, 2025 in the manner as specified hereinafter.

(4) After paragraph 7 of the Reserve Bank of India (Rural Co-operative Banks – Governance) Directions, 2025, the following shall be inserted, namely:

“7A. A director on the Board of an RCB, after completing a continuous tenure of ten years in office, shall be eligible to be re-appointed, whether by election or co-option or in any other manner, as a director on the Board of the same RCB only after undergoing a minimum cooling-off period of three years. During the cooling-off period, the said director shall not be associated with the RCB in any capacity / manner other than as a member / customer. This, however, shall not preclude him / her from being appointed as a director on the Board of another bank, if otherwise eligible.

Explanation:

For calculating the period of continuous tenure, the total time served on the Board of the RCB including the period of directorship preceding an interruption of less than three years but excluding the period of directorship preceding at least a three-year interruption shall be reckoned.”

Reserve Bank of India (Regional Rural Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026

May 18, 2026

1. Please refer to paragraph 104 of Reserve Bank of India (Regional Rural Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, dated November 28, 2025, on Investment Fluctuation Reserve (IFR). In view of certain operational constraints being faced by banks in the maintenance of IFR, there is a need to amend the extant instructions.

2. Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (hereinafter called the Act) and all other laws enabling the Reserve Bank in this regard, the Reserve Bank, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Amendment Directions hereinafter specified.

(i) These Directions shall be called the Reserve Bank of India (Regional Rural Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026.

(ii) These Amendment Directions shall come into effect from the date of issue.

4. The Reserve Bank of India (Regional Rural Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, are amended as provided below.

(i) Paragraph 104 shall be substituted by the following, namely: –

“104. An RRB shall create Investment Fluctuation Reserve (IFR) out of the realised gains on sale of investments, subject to the availability of net profit, until the amount of IFR is at least 2 per cent of the HFT and AFS portfolio. This minimum requirement shall be assessed annually and shall be computed with reference to the book value of investments in AFS and HFT categories as of the balance sheet date.”

Issuance of Foreign Exchange Management (Authorised Persons) Regulations, 2026

May 06, 2026

1. The Reserve Bank has reviewed the existing framework for authorisation of any person as an Authorised Person under the Foreign Exchange Management Act, 1999, with the objective to rationalise the framework to improve delivery of foreign exchange services as well as easing compliance requirements. Accordingly, the Foreign Exchange Management (Authorised Persons) Regulations, 2026 has been notified vide Notification No. FEMA 401/2026-RB dated April 30, 2026 (published in the Official Gazette on May 06, 2026). All authorised persons shall comply with aforementioned regulations as applicable to them.

2. Upon issuance of the aforementioned regulations, instructions, as per Annex I, contained in Master Directions – Money Changing Activities and Master Direction – Other Remittance Facilities are being amended. Further, the A.P. (DIR Series) Circulars as per the Annex II are being superseded.

3. These directions are being issued under Section 10(4) and Section 11 of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.