RBI's Second Amendment Directions 2026: Urban Cooperative Banks Get a Dedicated Calamity Resolution Framework
Overview and Background
The Reserve Bank of India has rolled out a significant regulatory update through the Reserve Bank of India (Urban Cooperative Banks – Resolution of Stressed Assets) Second Amendment Directions, 2026, bearing reference RBI/2026-27/56 DOR.STR.REC.___/21-04-048/2026-27, dated April 29, 2026. This amendment overhauls and supplements the existing Reserve Bank of India (Urban Cooperative Banks – Resolution of Stressed Assets) Directions, 2025, creating a dedicated and structured chapter for resolving borrower accounts adversely affected by natural calamities and similar external disruptions.
The regulatory backdrop for this amendment traces back to the Statement on Developmental and Regulatory Policies dated June 08, 2023, wherein the Reserve Bank publicly committed to rationalising prudential norms governing resolution plans for exposures impacted by natural calamities. The stated intent was to harmonise applicable regulatory instructions across different Regulated Entities (REs). Following a comprehensive internal review and a public consultation process through draft Directions, the final amendment has been issued after careful evaluation of stakeholder feedback.
The amendment exercises powers vested under Sections 20, 21, and 35A read with Section 56 of the Banking Regulation Act, 1949, and takes effect from July 1, 2026.
Key Definitional Insertions
Definition of 'Date of Invocation'
A new sub-paragraph 5(4A) has been inserted into the principal Directions, providing clarity on what constitutes the date of invocation in the context of calamity-related resolution:
'date of invocation' shall mean the date on which the borrower and the bank agree to proceed with a resolution plan under Chapter IV-A of these Directions through a documented arrangement, other than in case of deemed invocation as specified in paragraph 99K of these Directions.
This definition removes ambiguity in determining the trigger point for resolution timelines, which is critical given the strict time-bound framework introduced by the amendment.
Definition of 'Natural Calamity'
Sub-paragraph 5(9A) has been inserted to define:
'natural calamity' shall mean an event recognized under the National Disaster Response Fund (NDRF) / State Disaster Response Fund (SDRF)
By anchoring the definition to the NDRF/SDRF recognition framework, the RBI has ensured that eligibility for calamity-based resolution is tied to an objective, government-verified standard rather than being left to subjective bank-level determination.
Board-Approved Policy Requirements
A new Paragraph 9A has been inserted mandating that every Urban Cooperative Bank (UCB) incorporate specific provisions within its board-approved policy to address calamity-linked resolution. The policy must include the following:
- Objective principles governing the terms and conditions of relief to be extended across different borrower and loan categories
- Potential relief measures along with verifiable and measurable parameters to determine their applicability
- A clearly defined delegation matrix for decision-making and implementation of relief measures — including restructuring approvals and sanction of additional finance — with a specific focus on ensuring timely delivery of relief