RBI Mandates 3-Year Cooling-Off For Co-Operative Bank Directors After 10-Year Continuous Tenure

The Reserve Bank of India has introduced a mandatory three-year cooling-off period for directors of urban and rural co-operative banks after they complete 10 years of continuous tenure on the board of the same bank, seeking to prevent directors from briefly stepping down and returning to circumvent tenure limits.

The amendment directions, issued on May 25 by Chief General Manager Scenta Joy, came into force with immediate effect.

“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 for an extended period beyond the legally permissible tenure, which defeats the intent and spirit of the statutory provision,” the RBI said.

The new framework provides that a director completing 10 years of continuous tenure on the board of the same urban or rural co-operative bank can be reappointed to that bank only after a minimum cooling-off period of three years.

During this period, the individual cannot be associated with the bank in any capacity other than as a member or customer. However, the restriction does not prevent appointment as a director on the board of another bank, if otherwise eligible.

The amendment also clarifies how continuous tenure will be calculated. If a director leaves the board for less than three years and later returns, the earlier tenure will still be counted toward the 10-year limit. Only an interruption of at least three years will break continuity.

“For calculating the period of continuous tenure, the total time served on the Board 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.”

The move follows the Banking Laws (Amendment) Act, 2025, which increased the maximum continuous tenure for directors of these co-operative banks from eight years to 10 years with effect from August 1, 2025.

Click here to read the Reserve Bank of India (Urban Co-operative Banks - Governance) Amendment Directions, 2026.

Click here to read the Reserve Bank of India (Rural Co-operative Banks - Governance) Amendment Directions, 2026.