The Reserve Bank of India has issued the Second Amendment Directions for interest rates applicable to rural co-operative banks, temporarily withdrawing the interest rate ceiling on new deposits. This change aims to enhance liquidity and attract more deposits into the sector.
RBI Issues Second Amendment Directions for Rural Co-operative Banks
On August 25, 2026, the Reserve Bank of India (RBI) released the Second Amendment Directions concerning interest rates on deposits for rural co-operative banks. This amendment temporarily withdraws the interest rate ceiling that was previously imposed on new deposits, thereby allowing banks to offer competitive rates to enhance their liquidity.
The RBI had initially established these interest rate directions on November 28, 2025, and revised them on June 17, 2026. The latest amendment is part of an ongoing effort to stabilize and strengthen the rural banking sector and follows consistent trends to allow more flexibility in deposit rates.
This amendment is particularly significant as it opens avenues for rural co-operative banks to offer higher rates to their customers, potentially increasing their deposits, which are essential for funding rural development projects. Banks are now empowered to assess their financial positions and adjust their deposit rates accordingly.
“The temporary withdrawal of the interest rate ceiling is expected to create favorable conditions for rural banks to increase their deposit bases,” the RBI indicated in the directions.
For lawyers and banking practitioners, this amendment represents an important update that may influence the operations of rural co-operative banks significantly. It is crucial to stay informed regarding the regulatory changes that could affect client banking strategies and financial products.
Citations
- Reserve Bank of India (Rural Co-operative Banks – Interest Rate on Deposits) Directions (2026) RBI/2026-27/248