The country’s central banking authority announced on Tuesday that loans provided by commercial banks to a national-level cooperative development financing institution will be classified as priority sector lending, provided these loans are sanctioned on or after January 19, 2026. The funds extended to this development institution will be used to support cooperative societies by enabling access to financial assistance for eligible activities. However, this benefit will not apply to certain categories of banks, including regional rural banks, urban cooperative banks, small finance banks, and local area banks. The central banking authority clarified that the loans must strictly be utilized for activities that fall under the prescribed priority sector guidelines issued in 2025. Only lending aligned with the specified categories under these guidelines will qualify for such classification. In addition, the central government and the monetary regulator have introduced multiple measures aimed at strengthening the cooperative banking sector. These initiatives are designed to improve financial stability, enhance governance standards, promote digital banking services, and ensure stronger customer protection mechanisms. Deposits held in cooperative banks continue to be protected under the national deposit insurance framework. Each depositor is insured up to ?5 lakh per bank, including the interest component, offering a safeguard against potential bank failures. The cooperative development financing institution mentioned earlier is a statutory organization functioning under the administrative supervision of the central government’s ministry responsible for the cooperative sector. Its primary role is to provide financial assistance to cooperative institutions and support the expansion and development of cooperative activities across the country.

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