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Economics April 27, 2026 5 min read Daily brief · #33 of 106

Reserve Bank of India (Urban Co-operative Banks – Undertaking of Financial Services) – Amendment Directions, 2026

The Reserve Bank of India issued Amendment Directions on April 27, 2026, modifying the Urban Co-operative Banks (Undertaking of Financial Services) Direction...

GS Paper 3 (Indian Economy)

What Happened

  • The Reserve Bank of India issued Amendment Directions on April 27, 2026, modifying the Urban Co-operative Banks (Undertaking of Financial Services) Directions, 2025.
  • The amendment adds "AgriSURE — Agri Fund for Start Ups & Rural Enterprises" to Annex I of the original Directions, thereby authorising Urban Co-operative Banks (UCBs) to undertake activities related to this fund.
  • The notification was issued under Section 35A read with Section 56 of the Banking Regulation Act, 1949, with the RBI citing public interest as the basis.
  • The directions carry reference number RBI/2026-27/21 and took effect immediately upon issuance.

Static Topic Bridges

Urban Co-operative Banks (UCBs) — Structure and Regulatory Framework

Urban Co-operative Banks are primary cooperative societies that carry out the banking business in urban and semi-urban areas. They are dually regulated: the Registrar of Cooperative Societies under the respective state government handles incorporation and management, while the RBI regulates their banking functions under the Banking Regulation Act, 1949. There are over 1,500 UCBs in India, primarily serving small borrowers, artisans, and low-income households in urban areas. The Banking Regulation (Amendment) Act, 2020 significantly enhanced RBI's supervisory powers over UCBs, including control over management appointments and resolution mechanisms.

  • UCBs are governed by both state cooperative societies law and the Banking Regulation Act, 1949 (via Section 56).
  • Section 56 extended most provisions of the Banking Regulation Act to cooperative societies with modifications.
  • The 2020 amendment gave RBI powers to supersede boards and apply resolution mechanisms similar to commercial banks.
  • UCBs are categorised into Tier 1 to Tier 4 based on deposits, with differentiated regulatory requirements.

Connection to this news: The RBI's authority to expand the list of permitted financial services for UCBs flows directly from this dual regulatory structure — Section 35A allows binding directions in the public interest, enabling the addition of AgriSURE to UCBs' service portfolio.

Section 35A of the Banking Regulation Act, 1949 — RBI's Directive Power

Section 35A grants the RBI broad authority to issue binding directions to any banking company (including cooperative banks via Section 56) when it is satisfied that such directions are necessary in the public interest, in the interest of banking policy, or to prevent banking companies from conducting affairs in a manner detrimental to depositors' interests. Directions issued under Section 35A are legally binding on all banks covered, overriding their own internal regulations.

  • Section 35A is a plenary power — it allows the RBI to issue both prohibitory and enabling directions.
  • It has been used for actions such as placing banks under Prompt Corrective Action (PCA), restricting lending, and now expanding permissible financial services.
  • Violations of Section 35A directions attract penal provisions under the Banking Regulation Act.
  • Read with Section 56, these powers extend to all primary cooperative banks including UCBs.

Connection to this news: The AgriSURE amendment notification explicitly cites Section 35A read with Section 56 as the enabling provision, reflecting standard RBI practice of invoking these powers when expanding or restricting UCB activities.

AgriSURE — Agri Fund for Start Ups & Rural Enterprises

AgriSURE is a ₹750 crore Category-II Alternative Investment Fund (AIF) jointly promoted by the Government of India and NABARD, managed by NABVENTURES Ltd. (a NABARD subsidiary). It is designed to provide equity and quasi-equity support to agri-tech startups, food processing enterprises, and rural businesses. The fund receives ₹250 crore each from the Government of India and NABARD, with the remaining ₹250 crore mobilised from institutional and private investors. It targets supporting approximately 85 startups over a 10-year fund life, with per-startup ticket sizes of up to ₹25 crore.

  • Registered as a Category-II AIF with SEBI.
  • Investment focus: agri-tech, food processing, animal husbandry, fisheries, supply chain, farm mechanisation, biotechnology, waste management, renewable energy, and FPO support.
  • Fund duration: 10 years from inception, extendable by 2 years.
  • Managed by NABVENTURES Ltd., NABARD's venture capital arm.

Connection to this news: By including AgriSURE in the list of financial services UCBs may undertake, the RBI enables UCBs to channel their local capital and relationships toward agri-startup financing, deepening the fund's rural outreach through cooperative banking networks.

Alternative Investment Funds (AIFs) in India — SEBI Regulation

An Alternative Investment Fund (AIF) is a privately pooled investment vehicle that collects funds from sophisticated investors for investing per a defined investment policy. SEBI regulates AIFs under the SEBI (Alternative Investment Funds) Regulations, 2012. Category I AIFs invest in startups and early-stage ventures with positive spillover effects; Category II AIFs (like AgriSURE) are funds that do not employ leverage except for day-to-day operations; Category III AIFs employ complex trading strategies including leverage.

  • Category-II AIFs are not eligible for specific SEBI or government concessions but enjoy pass-through tax treatment.
  • Minimum investment per investor in an AIF is typically ₹1 crore.
  • AIFs are distinct from mutual funds — they cater to institutional and high-net-worth investors.
  • NABVENTURES Ltd. is registered as a Category-II AIF manager under SEBI.

Connection to this news: UCBs being permitted to invest in AgriSURE (a Category-II AIF) broadens their asset class exposure and aligns cooperative banking capital with long-term agri-entrepreneurship financing.

Key Facts & Data

  • Amendment reference: RBI/2026-27/21, issued April 27, 2026.
  • Legal basis: Section 35A read with Section 56, Banking Regulation Act, 1949.
  • AgriSURE corpus: ₹750 crore (₹250 crore GoI + ₹250 crore NABARD + ₹250 crore others).
  • AgriSURE registered as: Category-II AIF with SEBI, managed by NABVENTURES Ltd.
  • Estimated beneficiaries: ~85 agri-startups over 10-year fund life, up to ₹25 crore per startup.
  • India has over 1,500 UCBs, serving urban and semi-urban borrowers.
  • Banking Regulation (Amendment) Act, 2020 significantly enhanced RBI's UCB oversight powers.
On this page
  1. What Happened
  2. Static Topic Bridges
  3. Urban Co-operative Banks (UCBs) — Structure and Regulatory Framework
  4. Section 35A of the Banking Regulation Act, 1949 — RBI's Directive Power
  5. AgriSURE — Agri Fund for Start Ups & Rural Enterprises
  6. Alternative Investment Funds (AIFs) in India — SEBI Regulation
  7. Key Facts & Data
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