RBI/DOR/2025-26/292
DOR.MCS.REC.No.211/01-01-037/2025-26

November 28, 2025

Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) Directions, 2025

In exercise of the powers conferred by Sections 21, 35A, 45ZC(3), 45ZE(4) and 56 of Banking Regulation Act, 1949, and all other provisions / laws enabling the Reserve Bank of India (hereinafter called ‘the Reserve Bank’) in this regard, Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.

Chapter I – Preliminary

A. Short Tile and commencement

1. These Directions shall be called the Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) Directions, 2025.

2. These Directions shall become effective from the date of issue, unless indicated otherwise.

B. Applicability

3. These directions shall be applicable to all Urban Co-operative Banks (hereinafter collectively referred to as 'UCBs' and individually as a 'UCB').

In this context, Urban Co-operative Banks shall mean Primary Co-operative Banks as defined under section 5(ccv) read with Section 56 of Banking Regulation Act, 1949.

C. Definitions

4. In these Directions, unless the context states otherwise, the terms herein shall bear the meaning assigned to them below:

(1) ‘Accounts with survivorship clause’ refers to joint deposit accounts styled as ‘either or survivor’, or ‘anyone or survivor’, or ‘former or survivor’ or ‘latter or survivor’ or any other such clause.

(2) ‘Apostille’ refers to a certificate that authenticates the origin of a public document (e.g., a birth, marriage or death certificate, a judgment, an extract of a register or a notarial attestation). Apostilles can only be issued for documents issued in one country party to the Hague Apostille Convention and that are to be used in another country which is also a party to the Convention. In India, such attestations are done by Ministry of External Affairs.

(3) Annual Percentage Rate (APR) means the annual cost of credit to the borrower which includes interest rate and all other charges associated with the credit facility.

(4) Bank induced transaction means a transaction in the account initiated by a UCB as per its extant policy such as charges, fees, interest payments, penalties, taxes.

Note: Illustrative list of bank induced transactions is as under:

(i) All types of charges levied by banks including taxes deducted.

(ii) Interest paid on savings bank account balances.

(5) Bank Rate refers to the rate published by Reserve Bank in terms of Section 49 of the Reserve Bank of India, 1934.

(6) Consumer Credit refers to the loans given to individuals, which consists of

(i) loans for consumer durables,

(ii) credit card receivables,

(iii) auto loans (other than loans for commercial use),

(iv) personal loans secured by gold, gold jewellery, immovable property, term deposits (including FCNR(B)), shares and bonds, etc., (other than for business / commercial purposes),

(v) personal loans to professionals (excluding loans for business purposes), and

(vi) loans given for other consumptions purposes (e.g., social ceremonies, etc.). However, it excludes (a) education loans, (b) loans given for creation / enhancement of immovable assets (e.g., housing, etc.), (c) loans given for investment in financial assets (shares, debentures, etc.), and (d) consumption loans given to farmers under KCC.

(7) Current Account shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Interest Rate on Deposits) Directions, 2025

(8) Customer shall mean a user or a potential user of bank services, and may include:

(i) a person or entity that maintains an account and / or has a business relationship with a UCB;

(ii) one on whose behalf the account is maintained (i.e., the beneficial owner);

(iii) beneficiaries of transactions conducted by professional intermediaries, such as Stockbrokers, Chartered Accountants, Solicitors, etc., as permitted under the law, and

(iv) any person or entity connected with a financial transaction which can pose significant reputational or other risks to a UCB, say, a wire transfer or issue of a high value demand draft as a single transaction.

(9) Customer induced transaction means a transaction in an account which is in the nature of:

(i) a financial transaction initiated by or done at the behest of the account holder by a UCB / third party or;

(ii) a non-financial transaction, or;

(iii) KYC updation done in face-to-face physical mode or through digital channels such as internet banking or mobile banking application of a UCB.

Note: Illustrative list of financial transactions is as under:

(a) ATM / Cash withdrawal / deposit

(b) RTGS / NEFT/ IMPS /UPI / AePS / ABPS Transactions

(c) Internet Banking Transactions

(d) Debit Card Transactions

(e) Transfer of funds from / to the linked CBDC(e-Rupee) account

(f) Cheque Clearing

(g) Remittance of funds by way of demand drafts

(h) Cash withdrawal by third party through cheque

(i) Standing Instructions issued by the customer

(j) NACH Debit / Credits

(k) Term Deposit Interest / proceeds

(l) Dividend on shares / Interest on Debentures or any other investment proceeds

(m) Direct Benefit Transfer (DBT) credits

(n) Refunds such as related to e-commerce payments, Income Tax Returns, etc.

(o) National Electronic Toll Collection (NETC) debits

(10) Equated Periodic Instalment (EPI) means an equated or fixed amount of repayments, consisting of both the principal and interest components, to be paid by a borrower towards repayment of a loan at periodic intervals for a fixed number of such intervals; and which result in complete amortisation of the loan. EPIs at monthly intervals are called EMIs.

(11) Equivalent e-document shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025.

(12) Eligible collateral shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025.

(13) Jewellery shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025.

(14) Financial transaction means a monetary transaction in the savings / current account of a customer with a UCB either by way of a credit or debit transaction.

(15) Inoperative Account means a savings / current account where there are no ‘customer induced transactions’ in the account for a period of over two years.

(16) Key Facts of a loan agreement between a UCB / a group of regulated entities and a borrower are legally significant and deterministic facts that satisfy basic information required to assist the borrower in taking an informed financial decision.

(17) Key Facts Statement (KFS) means a statement of key facts of a loan agreement, in simple and easier to understand language, provided to the borrower in a standardised format.

(18) Loan to Value (LTV) ratio shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025.

(19) Microfinance loan shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025.

(20) Non-financial transaction means an enquiry or request for any product / service initiated by the account holder through any ATM or internet banking or mobile banking application of a UCB or through Third Party Application Providers, which requires two-factor authentication (2FA) and leaves a trail for audit purposes or successful log-in to the internet banking/ mobile banking application. Illustratively, this includes transactions such as change in transaction limit, request for issue of cheque book/ credit card/ debit card, nomination facility, balance enquiry, etc.

(21) Officially Valid Document shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025.

(22) Ornaments shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025.

(23) Personal Loans, as referred in Sections C & E of Chapter VIII, shall have the same meaning as defined in XBRL Returns – Harmonization of Banking Statistics dated January 04, 2018, as amended from time to time.

(24) Savings Deposit shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Interest Rate on Deposits) Directions, 2025.

(25) Term Deposit shall have the same meaning as defined in the Reserve Bank of India (Urban Co-operative Banks – Interest Rate on Deposits) Directions, 2025.

(26) Unclaimed Deposit means the credit balance in any deposit account maintained with banks, which have not been operated upon for ten years or more, or any amount remaining unclaimed for ten years or more as mentioned in paragraph 3(iii) of the “Depositor Education and Awareness” (DEA) Fund Scheme, 2014.

(27) Unclaimed Deposit Reference Number (UDRN) means a unique number generated through Core Banking Solution (CBS) and assigned to each unclaimed account/ deposit transferred to DEA Fund of RBI. The number shall be such that the account holder or a UCB branch where account is maintained, cannot be identified by any third party.

Chapter II – Institutional Framework

A. Role of Board

5. A UCB shall put in place approved policies and establish periodic review mechanisms to ensure sound business conduct and enhanced customer service.

A.1 Board approved policies

6. An illustrative list of policies to be approved by the Board or a Committee(s) to which powers have been delegated is provided below. The aspects to be covered in these policies are detailed in the relevant paragraphs of these Directions.

(1) Customer Compensation Policy

(2) Cheque Collection Policy

(3) Policy on Basic Savings Bank Deposit Account (BSBDA)

(4) Policy on Service Charges for various types of services offered

(5) Policy on Penal Charges on loans / advances

(6) Policy on settlement of claims

(7) Comprehensive Policy and SOP on safe deposit lockers facility

(8) Customer Relations Policy covering customer protection

(9) Policy on reset of floating rate loans including option to borrowers for switch between fixed and floating interest rates

(10) Branch Insurance Policy

(11) Policy regarding the conduct of employees and system for their recruitment, training and monitoring

(12) Policy on customer liability in case of reporting delays beyond seven days in unauthorised electronic banking transactions.

(13) Fair Practice Code for lending to microfinance borrowers.

A.2 Reviews to be carried out by the Board

7. An illustrative list of reviews to be carried out by the Board or Committee to which powers have been delegated are given below

(1) The Board / Customer Service Committee of Board shall review the progress in providing ramps at the entrance of bank branches and status of making all new ATMs as talking ATMs with Braille keyboards.

(2) Review of unclaimed gold and silver collateral at half-yearly intervals

(3) Review of customer service / customer care aspects every six months.

(4) Customer liability cases in unauthorised electronic banking transactions.

(5) Periodical evaluation of implementation of recommendations of Goiporia Committee.

Chapter III – Customer Service in Banks

A. Service at the Counters

A.1 Business and working hours

8. The employees of a UCB are expected to be at their seats at the commencement of the business hours and attend to all the customers who are in the branch prior to the close of business hours. With a view to ensuring that the service to customers is made available exactly at the commencement of business hours, a UCB may fix the working hours of the staff 15 minutes before the start of business hours at its branches in metropolitan and urban centres.

A.2 Display of time norms

9. Time norms for specified business transactions shall be displayed prominently in the banking hall so that it attracts the customers' attention as well as that of the employees for adherence.

10. A UCB shall issue instructions that all customers who enter the banking hall before the close of business hours may be attended to before closing the counters.

A.3 Changes in banking hours

11. No particular banking hours have been prescribed by law and a UCB may fix, after due notice to its customers, whatever business hours are convenient to it i.e., to work in double shifts, to observe weekly holiday on a day other than Sunday or to function on Sundays in addition to the normal working days, subject to observing normal working hours for public transactions.

12. A UCB shall give sufficient notice to the public / its customers of its intention of closing any of its branches / offices on a day other than a public holiday. A UCB shall note to avoid infringement of any other relevant local laws such as Shops and Establishment Act, etc.

13. The provisions, if any, regarding a UCB’s obligations to its staff under Industrial Awards / Settlements, shall be complied with. Clearing House authority of the place shall also be consulted in this regard.

A.4 Extension of business hours for non-cash transactions

14. Staff at the counters may undertake the following transactions during the extended business hours (branches to indicate the timings)

(1) non-voucher generating transactions:

(i) issue of passbook/statement of accounts

(ii) issue of cheque book

(iii) delivery of term deposit receipts/drafts

(iv) acceptance of share application form; and

(v) acceptance of clearing cheques / bills for collection

(2) voucher generating transactions:

(i) issue of term deposit receipts (TDR)

(ii) acceptance of cheques for locker rent due;

(iii) issue of travellers’ cheques

(iv) issue of gift cheques

(v) acceptance of individual cheques for transfer credit

A.5 Uninterrupted Service

15. A UCB shall devise appropriate procedures to ensure that no counter remains unattended during the business hours and uninterrupted service is rendered to the customers by making adequate relief arrangements as may be necessary.

A.6 Provision of Ultraviolet Lamps for Detection of Forged Notes

16. A UCB shall equip its branches with ultraviolet lamps so that detection of fake currency is made easy.

A.7 Providing of Note Counting Machines on counters

17. A UCB shall install dual display note counting machines at the payment counters of its branches for the use of its customers towards building confidence in the minds of the public to accept note packets secured with paper bands.

B. Work Culture, Discipline and Attitude

B.1 Identity Badges

18. Each employee of a UCB shall wear on his person, identity badge with photograph and name prominently displayed on it.

B.2 Job Enrichment

19. A UCB shall ensure periodic change of duties and job rotation among its employees.

B.3 Training

20. It is essential for a UCB to align its training programmes to the needs in various areas with an eye on customer service. The employees of a UCB shall be trained to develop the right kind of attitude towards customer service, and empathy towards customer needs and expectations. Training programmes may be so devised as to bring about positive attitudinal changes compatible to customer orientation.

B.4 Induction Training

21. Training to new recruits of a UCB shall be a precursor to other follow-up training programmes. All new recruits, i.e., clerks / officers shall be necessarily exposed to induction programme immediately after recruitment.

B.5 Reward and Recognition

22. The system of reward / recognition shall be such that it puts an indifferent employee to a considerable disadvantage - psychologically and even financially. Indifferent and casual approach to work (customer service) shall not go unnoticed, giving such employees wrong signals. A UCB shall ensure a fair system whereby employees are gauged or rated in the area of customer service and good work is rewarded.

B.6 Complaint Prone Employees

23. Placement of employees in customer contact slots shall be on a selective basis. By imaginative and innovative approaches, enough number of employees can be brought-up by training. Cases of deliberate recalcitrance and disregard of customer service spirit should be taken note of and kept in concerned employees’ service records apart from taking other action against such employees.

B.7 Systems and Procedures

24. A UCB shall keep its systems and procedures in trim, by a continuous process of introduction of new procedures that may be required and by doing away with unwanted ones.

B.8 Customer Service Audit

25. A UCB shall subject itself to an audit approach towards its customer service points at grass root levels and also at policy prescription and macro levels in the matter of extension of customer service.

B.9 Periodical Visits by Senior Officials

26. Senior officials while visiting the branches shall also give priority to the customer service aspects. The senior official may counter check the actual ‘branch atmosphere’ by having in hand a report on customer service submitted by the branch.

B.10 Infrastructure Provision

27. A UCB shall bestow attention to providing adequate space, proper furniture, drinking water facilities, clean environment, (which include keeping the walls free of posters) etc., in its premises to enable conduct of banking transactions smoothly and more comfortably.

B.11 Customer Education

28. Customer education both regarding rights and responsibilities in dealing with a UCB shall be viewed as a fundamental issue in any attempt to improve customer service. Customer shall be made aware not only of the various schemes and services offered by a UCB, but also about the formalities, procedures, legal requirements and limitations in the matter of providing services by the UCB, through a proper mix of advertisements, literature, interface, seminars, etc. A UCB shall involve its employees in all customer education programmes.

B.12 Security Arrangements

29. In view of the incidents involving terrorists / dacoits, a UCB shall review and improve upon the existing security system in its branches so as to instil confidence amongst the employees and the public. Regular drill / training to the security staff shall be ensured.

Chapter IV – Customer Guidance and Protection

A. Guidance to Customers and Disclosure of Information

A.1 Assistance / Guidance to Customers

30. All branches of a UCB, except very small ones, shall have "Enquiry" or "May I help you" counters. Such counters may exclusively attend to enquiries or may be combined with other functions depending upon the requirement. As far as possible, such counters shall be near the entry point to the banking hall.

A.2 Display of Information by a UCB– Comprehensive Notice Board

31. A UCB shall adhere to the following instructions on display of information.

A.2.1 Notice Boards

32. The minimum size of the Notice Board may be 2 feet by 2 feet as Board of such a size would facilitate comfortable viewing from a distance of 3 to 5 meters. A UCB shall have a Comprehensive Notice Board to display information at its branches as per the format given in Annex I.

33. While displaying the information in the notice board, a UCB shall adhere to the following principles:

(1) The notice board shall be updated on a periodical basis. It shall indicate the date up to which it was updated (incorporated in the display board).

(2) Though the UCB shall have discretion on pattern, colour and design of the board, the display shall be kept simple and readable.

(3) The notice board shall be in bilingual in Hindi speaking states and trilingual in other states.

(4) The notice board shall specifically indicate wherever recent changes have been done.

Explanation: If there is a recent change in the SSI loan products offered by a UCB, the information on the SSI loan products may be displayed as 'We offer SSI loans / products (changed on ……….)’.

(5) The notice board shall also indicate a list of items on which detailed information is available in booklet form.

34. In addition to the above Board, a UCB shall also display details such as ‘Name of the UCB / branch, Working Days, Working Hours and Weekly Off-days' outside the branch premises.

A.2.2 Booklets / Brochures

35. The detailed information as indicated in Paragraph (D) of Annex I may be made available in various booklets / brochures as decided by a UCB. These booklets / brochures may be kept in a separate file / folder in the form of ‘replaceable pages’ so as to facilitate copying and updation. In this connection, a UCB shall also adhere to the following broad guidelines:

(1) The file / folder may be kept at the customer lobby in the branch or at the ‘May I Help You’ counter or at a place that is frequented by most of the customers.

(2) The language requirements (i.e. bilingual in Hindi speaking states and trilingual in other states) shall be taken into account.

(3) It shall be ensured while printing the booklets that the font size is minimum Arial 10 so that the customers are able to easily read the same.

(4) Copies of booklets shall be made available to the customers on request.

A.2.3 Website

36. A UCB shall make available the detailed information indicated in Paragraph (D) of Annex I on its website. It shall be ensured that the customers are able to easily access the relevant information from the Home Page of the UCB’s website. The UCB shall adhere to the broad guidelines relating to dating of material, legibility, etc., while placing the same on its websites.

A.2.4 Other Modes of Display

37. A UCB shall consider displaying all the information that have to be given in the booklet form in the touch screen by placing them in the information kiosks. Scroll Bars, Tag Boards are other options available.

A.2.4 Other Issues

38. A UCB is free to decide on its promotional and product information displays. However, the mandatory displays shall not be obstructed in any way and given priority over the other display boards.

A.3 Levy of Service Charges

39. A UCB has the freedom to prescribe service charges with the approval of its Board. However, while fixing service charges, for various types of services like charges for cheque collection, etc., the UCB shall ensure that they are reasonable and are not out of line with the average cost of providing these services. The UCB shall also take care to ensure that customers with low volume of activities are not penalised.

40. A UCB shall leverage technology available with it and the telecom providers to ensure that the charges levied by it for sending SMS alerts are levied on all customers on actual usage basis.

A.4 Ensuring Reasonableness of Bank Charges

41. A UCB shall adopt / follow the principles outlined below for ensuring reasonableness in fixing and communicating service charges.

42. Identification of Basic Banking Services: A UCB shall identify basic banking services based on the following broad parameters:

(1) Nature of transactions

(a) Banking services that are ordinarily availed by individuals in the middle and lower segments, shall be the first parameter. These will comprise services related to deposit / loan accounts, remittance services and collection services.

(b) When the above transactions occur in different delivery channels, for the purpose of pricing, they may be treated on a separate footing.

(2) Value of transactions

(a) Low value of transactions with customers / public up to the ceiling as given below shall be the second parameter:

- Remittances up to Rs10,000 in each instance

- Collections below Rs10,000 in each instance

(Foreign exchange transactions valued up to $500/-)

(3) Based on the above-mentioned two parameters, an illustrative list of services is given below. The list of services identified is only an indicative one and the UCB may, at its discretion, include within the category of basic services such additional services as it may consider appropriate.

43. Offering basic banking services outside the scope of bundled products: A UCB shall make available the basic banking services at reasonable prices / charges and towards this, basic services shall be delivered outside the scope of bundled products.

44. Principles for ensuring reasonableness in fixing and communicating Service Charges:

(1) For basic services to individuals, a UCB shall levy charges at the rates that are lower than the rates applied when the same services are given to non-individuals.

(2) For basic services rendered to special category of individuals (such as individuals in rural areas, pensioners and senior citizens), a UCB shall levy charges on more liberal terms than the terms on which the charges are levied to other individuals.

(3) For the basic services rendered to individuals, a UCB shall levy charges only if the charges are just and supported by reason.

(4) For the basic services to individuals, a UCB shall levy services charges ad-valorem only to cover any incremental cost and subject to a cap.

(5) A UCB shall provide to the individual customers upfront and in a timely manner, complete information on the charges applicable to all basic services.

(6) A UCB shall provide advance information to the individual customers about the proposed changes in the service charges.

(7) A UCB shall collect for services given to individuals only such charges which have been notified to the customer.

(8) A UCB shall inform the customers in an appropriate manner recovery of service charges from the account or the transaction.

(9) A UCB shall without fail inform the customers in all cases when a transaction initiated by the UCB itself results in or is likely to lead to a shortfall in the minimum balance required to be maintained.

45. Disclosure and Notification of Service Charges: It is imperative that the customers are made aware of the service charges upfront and the changes in service charges are implemented only with prior notice to the customers. The following instructions shall be followed in this regard:

(1) Disclosure of Service Charges:

(i) A UCB shall communicate the service charges to new customers at the time of beginning of the relationship.

(ii) Service charges shall be displayed in the notice board at the branch so as to disseminate information to the customers / public, in addition to display on the website, as per extant instructions of the Reserve Bank

(iii) A UCB shall also put in place appropriate methods for communicating the service charges to customers of different profiles.

(2) Notifying the changes effected in service charges:

(i) An UCB shall take steps to ensure that any change in the service charges is effected only with prior notification to the customers of at least 30 days.

(ii) A UCB shall provide an option to the customer to accept the change and if not accepted, to exit from the relationship with the bank within the above 30 days without any cost.

(iii) A UCB may consider the option of advertising the changes in service charges in newspapers apart from including the information regarding the changes in any communication sent to the customer.

(iv) A UCB shall prominently display in the notice board as well as the website all the changes in service charges effected in the preceding 30 days.

46. Financial Education: A UCB shall disclose full-fledged information on its products and their implications to the customers so that the customers can make an informed judgment about their choice of products.

A.5 Display of information regarding Service Charges

47. A scheduled UCB shall place the details of service charges and fees on the homepage of its website at a prominent place under the title of 'Service Charges and Fees' so as to facilitate easy access to its customers. A weblink to the websites of the scheduled UCBs is provided in the RBI website to enable the UCB's customers to know the service charges and fees prevailing in the UCBs for various services.

48. A UCB shall display important aspects or indicators on a notice board, covering areas such as customer service information, service charges, grievance redressal. The notice board shall be updated on a periodical basis.

49. A UCB shall display information relating to interest rates and service charges in its premises as well as post it on its website, to enable the customer to obtain the desired information at a glance. An indicative format is enclosed at Annex I.

50. Further, a UCB, shall also display at its offices / branches the service charges relating to the following services in the local language:

(1) Services rendered free of charge

(2) Others

(i) Minimum balances to be maintained in the SB account

(ii) Charges leviable for non-maintenance of minimum balance in SB account

(iii) Charges for collection of outstation cheques

(iv) Charges for issue of Demand Draft

(v) Charges for issue of cheques books, if any

(vi) Charges for account statement

(vii) Charges for account closure, if any

(viii) Charges for deposit / withdrawal at ATM locations, if any

B. Erroneous Debits arising on fraudulent or other transactions

B.1 Vigilance by Banks

51. A UCB shall adhere to the guidelines and procedures for opening and operating deposit accounts to safeguard against unscrupulous persons opening accounts mainly to use them as conduit for fraudulently encashing payment instruments. However, in view of receipt of continuous complaints of fraudulent encashment by unscrupulous persons opening deposit accounts in the name/s similar to already established entities, resulting in erroneous and unauthorised debit of drawers’ accounts, a UCB shall remain vigilant to prevent such lapses and issue necessary instructions to the branches / staff.

B.2 Compensating the Customer

52. In cases of fraudulent encashment of third-party instruments by unscrupulous persons, by opening deposit accounts in the name/s similar to already established concern/s resulting in erroneous and unwanted debit of drawers’ accounts:

(1) In cases where a UCB is at fault, it shall compensate the customers without demur; and

(2) In cases where neither the UCB is at fault nor the customer is at fault, but the fault lies elsewhere in the system, then also the UCB shall compensate the customer (up to a limit) as part of a Board approved customer relations policy.

C. Limiting Liability of Customers in Unauthorised Electronic Banking Transactions

C.1 Strengthening of systems and procedures

53. Broadly, electronic banking transactions can be divided into two categories:

(1) Remote/ online payment transactions (transactions that do not require physical payment instruments to be presented at the point of transactions e.g., internet banking, mobile banking, card not present (CNP) transactions), Pre-paid Payment Instruments (PPI), and

(2) Face-to-face / proximity payment transactions (transactions which require the physical payment instrument such as a card or mobile phone to be present at the point of transaction e.g. ATM, POS, etc.).

54. The systems and procedures in UCBs shall be designed to make customers feel safe about carrying out electronic banking transactions. To achieve this, a UCB shall put in place:

(1) appropriate systems and procedures to ensure safety and security of electronic banking transactions carried out by customers;

(2) robust and dynamic fraud detection and prevention mechanism;

(3) mechanism to assess the risks (for example, gaps in the UCB’s existing systems) resulting from unauthorised transactions and measure the liabilities arising out of such events;

(4) appropriate measures to mitigate the risks and protect themselves against the liabilities arising therefrom; and

(5) a system of continually and repeatedly advising customers on how to protect themselves from electronic banking and payments related fraud.

C.2 Reporting of unauthorised transactions by customers to banks

55. A UCB shall ask its customers to mandatorily register for SMS alerts and wherever available register for e-mail alerts, for electronic banking transactions. The SMS alerts shall mandatorily be sent to the customers, while email alerts may be sent, wherever registered. The customers shall be advised to notify their UCB of any unauthorised electronic banking transaction at the earliest after the occurrence of such transaction and informed that the longer the time taken to notify the UCB, the higher will be the risk of loss to the UCB / customer. To facilitate this, a UCB shall provide customers with 24x7 access through multiple channels (at a minimum, via website, phone banking, SMS, e-mail, IVR, a dedicated toll-free helpline, reporting to home branch, etc.) for reporting unauthorised transactions that have taken place and/ or loss or theft of payment instrument such as card, etc. A UCB shall also enable customers to instantly respond by "Reply" to the SMS and e-mail alerts and the customers shall not be required to search for a web page or an e-mail address to notify the objection, if any. As an alternative, the bank shall prove and alternate number in the transaction alert SMS itself, to which the customer can immediately send a reply. Further, a direct link for lodging the complaints, with specific option to report unauthorised electronic transactions shall be provided by UCBs on home page of their website. The loss/ fraud reporting system shall also ensure that immediate response (including auto response) is sent to the customers acknowledging the complaint along with the registered complaint number. The communication systems used by UCBs to send alerts and receive their responses thereto shall record the time and date of delivery of the message and receipt of customer’s response, if any, to them. This shall be important in determining the extent of a customer’s liability. A UCB shall not offer facility of electronic transactions, other than ATM cash withdrawals, to customers who do not provide mobile numbers to it. On receipt of report of an unauthorised transaction from the customer, a UCB shall take immediate steps to prevent further unauthorised transactions in the account.

C.3 Limited Liability of a Customer

C.3.1 Zero Liability of a Customer

56. A customer’s entitlement to zero liability shall arise where the unauthorised transaction occurs in the following events:

(1) Contributory fraud/ negligence/ deficiency on the part of the UCB (irrespective of whether the transaction is reported by the customer or not).

(2) Third party breach where the deficiency lies neither with the UCB nor with the customer but lies elsewhere in the system, and the customer notifies the UCB within three working days of receiving the communication from the UCB regarding the unauthorised transaction.

C.3.2 Limited Liability of a Customer

57. A customer shall be liable for the loss occurring due to unauthorised transactions in the following cases:

(1) In cases where the loss is due to negligence by a customer, such as where he/ she has shared the payment credentials, the customer will bear the entire loss until he/ she reports the unauthorised transaction to the UCB. Any loss occurring after the reporting of the unauthorised transaction shall be borne by the UCB.

(2) In cases where the responsibility for the unauthorised electronic banking transaction lies neither with the UCB nor with the customer, but lies elsewhere in the system and the customer notifies the UCB of such a transaction within four to seven working days of receiving a communication of the transaction, the per transaction liability of the customer shall be limited to the transaction value or the amount mentioned in Table 2, whichever is lower.

58. Further, if the delay in reporting is beyond seven working days, the customer liability shall be determined as per the UCB’s Board approved policy. A UCB shall provide the details of their policy regarding customers’ liability formulated in pursuance of these directions at the time of opening the accounts. A UCB shall also display their approved policy in public domain for wider dissemination. The existing customers shall also be individually informed about a UCB’s policy.

59. Overall liability of the customer in third party breaches, as detailed in paragraphs 56(2) and 57(2) above, where the deficiency lies neither with the UCB nor with the customer but lies elsewhere in the system, is summarised in the Table 3:

60. The number of working days mentioned in Table 2 shall be counted as per the working schedule of the home branch of the customer excluding the date of receiving the communication.

C.4 Reversal Timeline for Zero Liability / Limited Liability of customer

61. On being notified by the customer, the UCB shall credit (shadow reversal) the amount involved in the unauthorised electronic transaction to the customer’s account within 10 working days from the date of such notification by the customer (without waiting for settlement of insurance claim, if any). The credit shall be value dated to be as of the date of unauthorised transaction. The UCB may also at its discretion decide to waive off any customer liability in case of unauthorised electronic banking transactions even in cases of customer negligence.

62. Further, the UCB shall ensure that:

(1) a complaint is resolved and liability of the customer, if any, established and the customer is compensated as per provisions of paragraphs 56 to 61 above, within such time as may be specified in the UCB’s Board approved policy, but not exceeding 90 days from the date of receipt of the complaint;

(2) where it is unable to resolve the complaint or determine the customer liability, if any, within 90 days, the compensation as prescribed in paragraphs 56 to 61 above is paid immediately to the customer; and

(3) in case of debit card/bank account, the customer does not suffer loss of interest, and in case of credit card, the customer does not bear any additional burden of interest.

C.5 Board Approved Policy for Customer Protection

63. A UCB shall formulate / revise its customer relations policy with approval of its Board, which shall clearly define the rights and obligations of customers in case of unauthorized transactions in specified scenarios i.e. debits to customer accounts owning to customer negligence / bank negligence / banking system frauds/ third party breaches etc. The policy shall also include mechanism of creating customer awareness on the risks and responsibilities involved in electronic banking transactions, and customer liability in case of unauthorized electronic banking transactions, procedure for reporting unauthorized electronic banking transactions and acknowledgement of complaints. It should also provide for a robust grievance redressal structure as per extant instructions, escalation matrix, clear timelines for resolution of customer complaints, and compensation keeping in view the instructions contained in paragraph 62 above. The instructions contained in this section shall be incorporated in the policy, and the policy should be prominently displayed at branches.

C.6 Burden of Proof

64. The burden of proving customer liability in case of unauthorised electronic banking transactions shall lie on the UCB.

C.7 Reporting and Monitoring Requirements

65. A UCB shall put in place a suitable mechanism and structure for the reporting of the customer liability cases to the Board or one of its Committees. The reporting shall, inter alia, include volume / number of cases and the aggregate value involved and distribution across various categories of cases viz., card present transactions, card not present transactions, internet banking, mobile banking, ATM transactions, etc. The Board in each UCB shall periodically review the unauthorised electronic banking transactions reported by customers or otherwise, as also the action taken thereon, the functioning of the grievance redress mechanism and take appropriate measures to improve the systems and procedures. All such transactions shall be reviewed by the UCB’s internal auditors.

Chapter V – Financial Inclusion and Accessibility

A. Financial Inclusion

A.1 Access to Banking Services - Basic Savings Bank Deposit Account

66. The Basic Savings Bank Deposit (BSBD) Account is designed as a savings account to offer certain minimum facilities, free of charge, to the holders of such accounts. A UCB shall offer the following basic minimum facilities under the BSBD Account, free of charge, without imposing any requirement for maintaining a minimum balance.

(1) The deposit of cash at its branch as well as ATMs / CDMs

(2) Receipt / credit of money through any electronic channel or by means of deposit / collection of cheques drawn by Central / State Government agencies and departments

(3) No limit on number and value of deposits that can be made in a month

(4) Minimum of four withdrawals in a month, including ATM withdrawals

(5) ATM Card or ATM-cum-Debit Card

67. The BSBD Account shall be considered a normal banking service available to all.

68. A UCB is free to provide additional value-added services, including issue of cheque book, beyond the above minimum facilities, which may / may not be priced (in non-discriminatory manner) subject to disclosure.

69. The availment of such additional services shall be at the option of the customers. However, while offering such additional services, a UCB shall not require the customer to maintain a minimum balance. Offering such additional services will not make it a non-BSBD Account, so long as the prescribed minimum services are provided free of charge.

70. The holders of BSBD Account shall not be eligible for opening any other savings bank deposit account in that UCB. Customers having any other existing savings bank deposit account in that UCB shall be required to close it within 30 days from the date of opening a BSBD Account. A UCB shall take a declaration from the customers that they are not having a BSBD account in any other UCB, before opening a BSBD account.

71. The BSBD Account shall be subject to RBI instructions on KYC/AML for opening of bank accounts issued vide Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025.

72. The instructions issued on free transactions available for normal savings bank account in own-bank / other bank ATMs vide circulars DPSS.CO.PD.No.316/02.10.002/2014-15 dated August 14, 2014 and DPSS.CO.PD.No.659/02.10.002/2014-15 dated October 10, 2014 are not applicable to BSBD accounts. The minimum free withdrawals available to the BSBD Account holders can be made at all ATMs (own-bank / other bank ATMs).

73. A UCB shall frame Board approved policy/ operational guidelines in this regard.

B. Providing Banking Facilities to Persons with Disabilities

B.1 Need for Bank Branches / ATMs to be made accessible to persons with disabilities

74. A UCB shall take necessary steps to provide all existing ATMs / future ATMs with ramps so that wheelchair users / persons with disabilities can easily access them. Care may also be taken to make arrangements in such a way that the height of the ATMs do not create an impediment in their use by wheelchair users. However, in cases where it is impracticable to provide such ramp facilities, whether permanently fixed to earth or otherwise, this requirement may be dispensed with, for reasons recorded and displayed in branches or ATMs concerned.

75. A UCB shall also take appropriate steps, including providing of ramps at the entrance of its branches, wherever feasible, so that the persons with disabilities / wheelchair users can enter its branches and conduct business without difficulty. A UCB shall report the progress made in this regard periodically to their respective Customer Service Committee of the Board and ensure compliance.

B.2 Providing banking facilities to Visually Impaired Persons

76. A UCB shall ensure that all the banking facilities such as cheque book facility including third party cheques, ATM facility, Net banking facility, locker facility, retail loans, credit cards etc. are invariably offered to its visually challenged customers without any discrimination. A UCB shall also advise its branches to render all possible assistance to the visually challenged for availing the various banking facilities.

77. A UCB shall ensure all ATMs as talking ATMs with Braille keypads.

78. A UCB shall also provide magnifying glasses in all its branches for the use of persons with low vision, wherever they require, for carrying out banking transactions with ease. The branches of a UCB shall display at a prominent place notice about the availability of magnifying glasses and other facilities available for persons with disabilities.

B.3 Operation of Bank Accounts by Old / Sick / Incapacitated Customers

79. In order to facilitate old / sick / incapacitated bank customers to operate their bank accounts, procedure as laid down below shall be followed. The cases of sick / old/ incapacitated account holders fall into the following categories:

(1) An account holder who is too ill to sign a cheque/cannot be physically present in the UCB to withdraw money from his bank account but can put his / her thumb impression on the cheque / withdrawal form, and

(2) An account holder who is not only unable to be physically present in the UCB but is also not even able to put his/her thumb impression on the cheque / withdrawal form due to certain physical defect / incapacity.

80. A UCB may follow the procedure as under:

(1) Wherever thumb or toe impression of the sick / old / incapacitated account holder is obtained, it should be identified by two independent witnesses known to the UCB, one of whom should be a responsible UCB official.

(2) Where the customer cannot even put his / her thumb impression and also would not be able to be physically present in the UCB, a mark obtained on the cheque/withdrawal form which should be identified by two independent witnesses, one of whom should be a responsible UCB official.

81. In such cases, the customer shall be asked to indicate to a UCB as to who would withdraw the amount from the UCB on the basis of cheque/withdrawal form as obtained above and that person should be identified by two independent witnesses. The person who would be actually drawing the money from the UCB should be asked to furnish his signature to the UCB.

82. In this context, according to an opinion obtained by the Indian Banks’ Association from their consultant on the question of opening of a bank account of a person who had lost both his hands and could not sign the cheque/withdrawal form, there must be physical contact between the person who is to sign and the signature or the mark put on the document. Therefore, in the case of the person who has lost both his hands, the signature can be by means of a mark. This mark can be placed by the person in any manner. It could be the toe impression, as suggested. It can be by means of mark which anybody can put on behalf of the person who has to sign, the mark being put by an instrument which has had a physical contact with the person who has to sign.

B.4 Compliance with Hon’ble Supreme Court Order dated April 30, 2025 in the matter of Pragya Prasun and Ors. vs Union of India and Ors. (W.P.(C) 289 of 2024) and Amar Jain vs Union of India & Ors. (W.P.(C) 49 of 2025)

83. Attention of a UCB is drawn to the Order of the Hon’ble Supreme Court dated April 30, 2025 in the matter of Pragya Prasun and Ors. vs. Union of India and Ors. (W.P.(C) 289 of 2024) and Amar Jain vs. Union of India & Ors. (W.P.(C) 49 of 2025). A UCB shall undertake appropriate measures to ensure compliance with the above Supreme Court Order, as applicable.

B.5 Legal Guardianship Certificate issued under National Trust for the welfare of persons with autism, cerebral palsy, mental retardation and multiple disabilities Act, 1999.

84. The following guidelines shall be applicable for the purpose of opening / operating bank accounts of the above persons:

(1) The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 provides a law relating to certain specified disabilities. Clause (j) of Section 2 of that Act defines a “person with disability” to mean a person suffering from any of the conditions relating to autism, cerebral palsy, mental retardation or a combination of any two or more of such conditions and includes a person suffering from severe multiple disabilities. This Act empowers a Local Level Committee to appoint a guardian, to a person with disabilities, who shall have the care of the person and property of the disabled person.

(2) A UCB is advised to take note of the legal position stated above and may rely on and be guided by the orders / certificates issued by the competent authority, under the respective Acts, appointing guardians / managers for the purposes of opening/operating bank accounts. In case of doubt, care may be taken to obtain proper legal advice. Further, the extant instructions are not intended to mandate banks to insist on appointment of a guardian as a matter of routine from every person “who is in need of treatment by reason of any mental disorder”. A UCB shall not insist on guardianship certificate from all mentally ill persons and seek appointment of a guardian only in such cases where they are convinced on their own or based on documentary evidence available, that the concerned person is mentally ill and is not able to enter into a valid and legally binding contract.

85. A UCB shall ensure that its branches give proper guidance to their customers so that the guardians / managers of the disabled persons do not face any difficulties in this regard.

C. Rights of Transgender Persons – Changes in Bank Forms / Applications etc.

86. A UCB shall include ‘third gender’ in all forms/applications etc. prescribed by the Reserve Bank or the UCB itself, wherein any gender classification is envisaged.

D. Information in Trilingual form

87. A UCB shall make available to the customers brochures / pamphlets in regional language / Hindi / English giving details of various schemes available and terms and conditions thereof. Such brochures may also contain, among others, do's and don'ts for smooth handling of day-to-day banking transactions, e.g, updation of passbooks preferably in the leaner weeks of the month, say, third / fourth week, advantages of maintaining joint accounts and nomination, keeping the term deposit receipts in safe custody with the UCB with instructions for disposal of maturity, etc.

E. Advisory Services on Deposit Schemes

88. A UCB shall provide assistance / guidance to customers in the area of investment of funds in the various deposit schemes vis-à-vis the requirement of the customers.

Chapter VI – Payment and Remittance Services

A. Issue of Duplicate Demand Draft

A.1 Issue of Duplicate Demand Draft without receipt of Non-Payment Advice

89. The duplicate draft amounting to Rs5,000 or less, may be issued on the basis of adequate indemnity and without obtaining Non-Payment Advice (NPA) from the drawee branch.

A.2 Fixation of timeframe for issue of duplicate demand draft

90. A UCB shall ensure that a duplicate demand draft is issued within a fortnight from the receipt of such requests. For delay in issuing duplicate demand draft beyond the above stipulated period, it shall pay interest at rate applicable for term deposit of corresponding maturity in order to compensate the customer for such delay. These instructions would be applicable only in cases where the request for duplicate demand draft is made by the purchaser or the beneficiary and would not be applicable in the case of third-party endorsements. Senior Officials, while visiting branches, shall make it a point to check implementation of the above instructions.

B. Cheque Books / Cheque Collection etc

B.1 Cheque Collection Policy

91. The cheque collection policy should be integrated with the deposit policy formulated by a UCB in line with the model deposit policy of Indian Banks’ Association or Association of which it is a member.

92. The policy should clearly lay down the liability of a UCB by way of interest payments due to delays for non-compliance with the standards set by the UCB itself.

93. Compensation by way of interest payment, where necessary, should be made without any claim from the customer.

94. Adequate care may be taken to ensure that the interests of the small depositors are fully protected.

95. The policy should be placed before the Board of the UCB and the Board's specific approval should be obtained on the reasonableness of the policy and the compliance with the spirit of our guidelines.

B.2 Acceptance of cheques bearing a date as per National Calendar

96. A UCB shall accept cheques bearing a date as per National Calendar (Saka Samvat) for payment, if otherwise found in order. However, the Gregorian calendar date corresponding to the National Saka calendar shall be ascertained to avoid payment of stale cheques.

B.3 Issue of Cheque Books

97. Fresh cheque books should be issued only against production of duly signed requisition slips from previous cheque book issued to the party. In case the cheque book is issued against a requisition letter, the drawer should be asked to come personally to the UCB or cheque book should be sent to him under registered post directly without being delivered to the bearer. Loose cheques shall be issued to account holder only when they come personally with a requisition letter and on production of passbooks.

98. A UCB shall take due care to ensure that any unusually large demand by any account holder for cheque books is looked into carefully to make sure that the cheque leaves are needed for genuine short-term business requirements. Banking facilities shall not be allowed to be misused by any constituent for mobilising resources by giving people a false sense of assurance through issue of such long duration post-dated cheques.

B.4 Cheque Drop Facility and the Facility for Acknowledgement of cheques

99. While the cheque drop facility may be made available to the customers, the facility for acknowledgement of cheques at the regular collection counters shall not be denied to them. No branch shall refuse to give an acknowledgement on cheques being tendered by customers at its counters. Further, customers shall be made aware of both options available to them i.e., dropping cheques in the drop box or tendering them at the counters so that they can take an informed decision in this regard. Therefore, a UCB shall display on the Cheque Drop-Box itself that "Customers can also tender the cheques at the counter and obtain acknowledgement on the pay-in-slips". The above message shall be displayed in English, Hindi and the concerned regional language of the State.

B.5 Rounding off cheques to the nearest rupee

100. A UCB shall ensure that cheques / drafts issued by clients containing fractions of a Rupee are not rejected or dishonoured by it. A UCB shall review the practice being followed by it in this regard and take necessary steps, including through issue of internal circulars, etc., to ensure that the concerned staff are well versed with these instructions so that the general public does not suffer. A UCB shall also ensure that appropriate action is taken against members of its staff who are found to have refused to accept cheques / drafts containing fractions of a Rupee.

Chapter VII – Deposit and Other Liabilities

A. Opening of Deposit Accounts

A.1 Opening / Operation of Deposit Accounts

A.1.1 Customer Identification Procedure for individual accounts

101. An UCB shall be guided by Reserve bank’s instructions on KYC / AML for opening and operation of accounts as prescribed in the Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025.

A.2 Levy of charges for non-maintenance of minimum balance

102. While levying charges for non-maintenance of minimum balance in savings bank account, a UCB shall be subject to the following guidelines:

(1) In the event of a default in maintenance of minimum balance / average minimum balance as agreed to between a UCB and customer, the UCB should notify the customer clearly by SMS / email / letter etc., that in the event of the minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable.

(2) In case the minimum balance is not restored within a reasonable period, which shall not be less than one month from the date of notice of shortfall, penal charges may be recovered under intimation to the account holder.

(3) The policy on penal charges to be so levied shall be decided with the approval of the Board of the UCB.

(4) The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of account. A suitable slab structure for recovery of charges may be finalized.

(5) It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services.

(6) It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance.

A.3 Statement of account / Passbook

A.3.1 Savings bank passbook / statement of account

103. A UCB shall invariably offer passbook facility to all its savings bank account holders (individuals). The cost of providing such passbooks should not be recovered from the customers.

104. A UCB shall ensure that full address, telephone number, MICR Code and IFSC of the branch is invariably mentioned in the Passbook / Statement of Accounts issued to account holders.

105. The bank shall devise controls to ensure that the passbooks are updated on an ongoing basis, and complete and correct particulars are written in a legible hand.

106. A UCB may take the following steps to provide customer satisfaction in these areas:

(1) Customer education drives may be launched to bring home the advantages of getting the passbooks updated regularly / periodically.

(2) Employees may be exhorted to attach importance to this area to provide customer satisfaction.

107. As a rule, passbooks shall be updated immediately on submission. If updation is not possible immediately due to a large number of entries, then paper tokens be issued for collection of passbooks on the next day.

A.3.2 Recording of Details of Transactions in Passbook / Statement of Account by Co-operative Banks

108. Constant attention shall be given to ensure entry of correct and legible particulars in the pass books and statement of accounts. A UCB shall avoid inscrutable entries in passbooks / statement of accounts and ensure that brief, intelligible particulars are invariably entered in passbooks / statement of account.

109. A UCB shall at a minimum provide the relevant details in respect of entries in the accounts as illustrated (the list is indicative and not exhaustive) below:

Note: In case of single debit in account with multiple credits, the payee name/ account number/ branch/ bank shall not be recorded. However, the fact of “multiple payees” will be indicated.

110. A UCB shall also incorporate information about ‘deposit insurance cover’ along with the limit of coverage, subject to change from time to time, upfront in the passbooks.

A.3.3 Term deposits

111. A UCB shall ensure that its term deposit schemes are made known to the customers through proper publicity and advice. The customers shall also be informed specifically of the provision of monthly interest on term deposits at a discounted rate and the facility of safe custody of term deposit receipts.

A.4.1 Disposal of Deposits

112. Term deposit application forms may be so devised as to contain a direction for disposal of deposits on maturity. In those cases where the customer does not indicate the course of action by a UCB on maturity of deposits, it shall as a rule send intimation of impending due date of the deposit well in advance.

A.4.2 Repayment of Term Deposits

113. A UCB shall adhere to the following instructions relating to operations in term deposit accounts:

(1) If term deposit accounts are opened with operating instructions ‘Either or Survivor’, the signatures of both the depositors need not be obtained for payment of the amount of the deposits on maturity. However, the signatures of both the depositors shall be obtained, in case the deposit is to be paid before maturity. If the operating instruction is ‘Either or Survivor’ and one of the depositors is deceased before the maturity, no pre-payment of the term deposit may be allowed without the concurrence of the legal heirs of the deceased joint holder. This, however, would not stand in the way of making payment to the survivor on maturity.

(2) In case the mandate is ‘Former or Survivor’, the ‘Former’ alone can operate /withdraw the matured amount of the term deposit, when both the depositors are alive. However, the signature of both the depositors shall be obtained, in case the deposit is to be paid before maturity. If the former is deceased before the maturity of the term deposit, the ‘Survivor’ can withdraw the deposit on maturity. Premature withdrawal would however require the consent of both the parties, when both of them are alive, and that of the surviving depositor and the legal heirs of the deceased in case of death of one of the depositors.

(3) If the joint depositors prefer to allow premature withdrawals of term deposits also in accordance with the mandate of ‘Either or Survivor’ or ‘Former or Survivor’, as the case may be, it would be open to banks to do so, provided they have taken a specific joint mandate from the depositors for the said purpose.

A.4.3 Renewal of term deposits frozen by Law Enforcement Authorities

114. In cases where a term deposit account(s) of a depositor is frozen by a UCB on the order of law enforcement authorities, the UCB shall obtain a request letter from the depositor on maturity for renewal of the deposit. The depositor shall be given an option to choose the term for renewal of the deposit. In case the depositor does not exercise the option of choosing the term for renewal, the UCB shall renew the deposit for a term equal to the original term.

A.4.4 Timely Issue of TDS Certificate to Customers

115. A UCB is not required to deduct TDS from depositors who submit declaration in Form 15-G / 15-H under Income Tax Rules, 1962. The UCB shall give an acknowledgment at the time of receipt of such declaration.

116. A UCB shall put in place a system that to provide TDS Certificate in Form 16A to its customers from whose deposit accounts income tax has been deducted at source, within the timeframe prescribed under the Income Tax Rules.

B. Opening of and operation in deposit accounts of minors

117. Minors of any age may be allowed to open and operate savings and term deposit accounts through his/ her natural or legal guardian. They may also be allowed to open such accounts with mother as guardian in terms of instructions issued on December 29, 1976, whose contents are reproduced below:

It has been brought to our notice that considerable difficulty is being experienced by women customers in opening bank accounts in the names of minors, with mothers as their guardians. Presumably, UCBs are reluctant to accept the mother as a guardian of a minor, while father is alive in view of section 6 of the Hindu Minority and Guardianship Act, 1956, which stipulates that the father alone should be deemed to be the guardian in such case. To overcome this legal difficulty and to enable a UCB to open freely such accounts in the name of minors under the guardianship of their mothers, it has been suggested in some quarters that the above provisions should be suitably amended. While it is true that an amendment of the above Act may overcome the difficulty in the case of Hindus, it will not solve the problem for other communities as minors belonging to Muslim, Christian, Parsi Communities would still be left out unless the laws governing these communities are also likewise amended.

The legal and practical aspects of the above problem were, therefore, examined by us in consultation with the Government of India and we are advised that if the idea underlining the demand for allowing mothers to be treated as guardians relates only to the opening of fixed and savings bank accounts, there would seem to be no difficulty in meeting the requirements as, notwithstanding the legal provisions, such accounts could be opened by UCBs provided they take adequate safeguards in allowing operations in the accounts by ensuring that the minors' accounts opened with mothers as guardians are not allowed to be overdrawn and that they always remain in credit. In this way, the minors' capacity to enter into contract would not be a subject matter of dispute. If this precaution is taken, a UCBs' interests would be adequately protected. We shall, therefore, be glad if you will kindly apprise all your branches of the position as stated above and instruct them to allow minors' accounts (fixed and savings only) with mothers as guardians to be opened, whenever such requests are received by them, subject to the safeguards mentioned above.

118. Minors above such an age limit not less than 10 years and up to such amount and such terms as may be fixed by a UCB keeping in view its risk management policy, may be allowed to open and operate savings / term deposit accounts independently, if they so desire, and such terms shall be duly conveyed to the account holder.

119. On attaining the age of majority, fresh operating instructions and specimen signature of the account holder shall be obtained and kept on record. Moreover, if the account is operated by the guardian, the balance shall be got confirmed. A UCB shall take advance action, including communicating these requirements to minor account holders attaining the age of majority, to ensure fulfilment of these requirements.

120. A UCB is free to offer additional banking facilities like internet banking, ATM/ debit cards, cheque book facility, etc., to the minor account holders basis its risk management policy, product suitability and customer appropriateness.

121. A UCB shall ensure that accounts of minors, whether operated independently or through a guardian, are not allowed to be overdrawn and that these always remain in credit balance.

122. A UCB shall perform customer due diligence for opening of deposit accounts of minors and undertake ongoing due diligence, as per the provisions of Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025.

C. Unclaimed Deposits and Inoperative Accounts

C.1.1 Review of Accounts

123. A UCB shall undertake at least an annual review in respect of accounts, where there is no customer induced transactions for more than a year. In cases where there is no explicit mandate to renew the term deposit, a UCB shall review such accounts if the customers have not withdrawn the proceeds after maturity or transferred these to their savings/current account in order to prevent such deposits from becoming unclaimed. A UCB shall inform the account/deposit holders in writing through letters or email or SMS (if the email and mobile number are registered with the UCB) that there has been no operation in their accounts/deposits in the last one year, as the case may be. The alert messages shall invariably mention that the account would become ‘inoperative’ if no operations are carried out during the next one year and, the account holder would be required to submit KYC documents afresh for reactivating the account in such case.

124. If the letters are returned undelivered or no response is received through registered email, a UCB shall immediately undertake an enquiry to find out the whereabouts of account holder or his/her nominee/legal heirs in case the account holder is deceased.

125. In case any response is received from the account holder giving the reasons for not operating the account, a UCB shall continue to classify the account as operative for one more year and the account holder shall be advised to operate the account within a period of one year (herein after referred to as ‘extended period’). In case the account holder still fails to operate the account within the extended period, a UCB shall classify the said account as inoperative account after the expiry of the extended period.

126. For the purpose of classifying an account as ‘inoperative’, only customer induced transactions and not UCB induced transactions shall be considered. There may be instances where the customer has given a mandate like Standing Instructions (SI) / auto-renewal instructions and there are no other operations in the Savings / Current account or the Term Deposit. These transactions shall also be treated as customer induced transactions.

127. The classification of an account as inoperative shall be for a particular account of the customer and not with reference to the customer. In case a customer is maintaining multiple accounts / deposits with a UCB, all such accounts/deposits shall be assessed individually for the purpose of classifying them as inoperative account/ unclaimed deposit, as the case may be.

128. In case the account holder is not carrying out transaction and the account is inoperative due to shifting of primary account to another bank, the account holder may be requested to provide the details of the new bank account with authorisation to enable the UCB to transfer the balance from the existing bank account.

C.1.2 Treatment of accounts opened for credit of scholarship amount and credit of Direct Benefit Transfer under Government Schemes

129. UCBs open zero balance accounts for beneficiaries of Central and State government schemes and for students who receive scholarship. Central and State governments have been expressing difficulty in crediting cheques / Direct Benefit Transfer / Electronic Benefit Transfer / scholarship amount in the zero balance accounts opened by a UCB for beneficiaries of Central / State government schemes and for students who receive scholarship, as they are also classified as inoperative due to non-operation for two years. A UCB shall, based on the purpose of opening of the account, segregate the aforementioned accounts in their CBS, so that the stipulation of ‘inoperative’ account is not applicable to these accounts due to their non-operation for a period of more than two years. To avoid the risk of fraud, etc., in such accounts, while allowing operations in these accounts, a UCB should exercise due diligence as per the extant instructions.

C.1.3 Segregation and Audit of Inoperative Accounts/ Unclaimed Deposits

130. The segregation of inoperative accounts is required to be done to reduce the risk of frauds. The transactions in inoperative accounts, which have been reactivated, shall be monitored regularly, for at least six months, at higher levels (i.e., by controlling authorities of the concerned branch) without the knowledge and notice of the customers and the dealing staff.

131. A UCB shall ensure that amounts lying in inoperative accounts/unclaimed deposits and reactivated inoperative accounts/ unclaimed deposits, are subjected to concurrent audit.

C.1.4 Tracing of Customers of Inoperative Accounts/ Unclaimed Deposits

132. A UCB shall contact the holder(s) of the inoperative account/ unclaimed deposit through letters, email or SMS (if the email and mobile number are registered with the UCB). The email/ SMS shall be sent on a quarterly basis.

133. In case the whereabouts of the holder(s) of the inoperative account/ unclaimed deposit are not traceable, a UCB shall contact the introducer, if any, who had introduced the account holder to the UCB at the time of opening of the account. A UCB shall also contact the nominee, if registered, for tracing the customer.

134. A UCB shall undertake special drives periodically to find out the whereabouts of the customers, their nominees or legal heirs in respect of inoperative accounts / unclaimed deposits.

C.1.5 Activation of Inoperative Accounts

135. A UCB shall make available the facility of updation of KYC for activation of inoperative accounts/ unclaimed deposits at all branches (including non-home branches). Further, a UCB shall endeavour to provide the facility of updation of KYC in such accounts and deposits through Video-Customer Identification Process (V-CIP). The V-CIP related instructions under Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025 shall be adhered to by the bank. Additionally, the services of an authorised Business Correspondent of a UCB may be utilized for activation of inoperative accounts as prescribed in these Directions and through V-CIP if requested by the account holder, subject to the facility of V-CIP being provided by a UCB.

136. A UCB shall activate the inoperative accounts/ unclaimed deposits, including those which are under freeze by orders of various agencies like Courts, Tribunals, Law Enforcement Agencies, only after adhering to the KYC instructions provided in the Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025 such as Customer Due Diligence (CDD), customer identification, risk categorisation, etc.

137. A UCB shall ensure that activation of inoperative account/ unclaimed deposits in CBS necessarily requires second level of authorisation by another officer at the same or higher level (i.e., through maker and checker). System logs shall invariably be maintained in case of any activity in or activation of inoperative accounts/unclaimed deposits for concurrent audit purpose. The preservation period of such system logs shall be as per the internal guidelines of a UCB.

138. A UCB shall automatically intimate the inoperative account/ unclaimed deposit holders though SMS and registered email stating that on the basis of the KYC documents submitted by them, the inoperative status of the account has been removed. The intimation shall also mention the remedial measures available to them to report unauthorised access, if any. This would alert the account/ unclaimed deposit holder against any possible fraudulent activity in his/her inoperative account. A UCB shall have in place adequate operational safeguards to ensure that the claimants in case of inoperative accounts/ unclaimed deposits are genuine. A UCB shall process requests for activation of inoperative account/ unclaimed deposits within three working days from the receipt of the complete application.

C.1.6 Payment of Interest

139. Interest on savings accounts shall be credited on a regular basis irrespective of the fact that the account is in operation or not.

C.1.7 Levy of Charges

140. A UCB shall not levy penal charges for non-maintenance of minimum balances in any account that is classified as an inoperative account.

141. No charges shall be levied for activation of inoperative accounts.

C.1.8 Display of Unclaimed Deposits and Search Facility

142. A UCB shall host the details of unclaimed deposits {only name, address (without pin code) and Unclaimed Deposit Reference Number (UDRN)}, which have been transferred to DEA Fund of RBI on their respective websites, which shall be updated regularly, at least on a monthly basis. A UCB, which does not have its own website shall make available the above list of unclaimed deposits in its respective branches. The database hosted on the website shall provide a search option to enable the public to search for their unclaimed deposits using name in combination with the address of the account holder/ entity. Upon a successful search, details of unclaimed deposits shall be displayed in a format comprising account holder’s name(s), his/her address (without pincode) and UDRN only. In case such accounts are not in the name of individuals, the search input and result should include names of individuals authorised to operate the accounts. However, the account number, its type, outstanding balance and the name of the branch shall not be disclosed on the UCB’s website.

C.1.9 Fraud Risk Management in Inoperative Accounts

143. A UCB shall not allow any debit transaction in an inoperative account unless there is a customer induced activation as per the procedure mentioned in paragraphs 135 to 138 above. Further, a UCB shall also consider imposing a cooling-off period on reactivation, with restrictions on the number and amount of transactions, as may be applicable for newly opened accounts with the UCB.

144. A UCB shall ensure that there is no unauthorised access to customer data pertaining to the inoperative accounts. A UCB shall also ensure that adequate steps are taken to prevent data theft and related misuse for fraudulent purposes.

C.1.10 Customer Awareness

145. A UCB shall provide on its website as well as at its branches, the information on the process for activation of the inoperative account/ unclaimed deposits and claiming the balances therein. Necessary claim forms and documents may be made available for the benefit of customers.

146. A UCB shall conduct public awareness and financial literacy campaigns regularly to educate the members of public about the activation of inoperative accounts/unclaimed deposits and the prescribed procedure to claim amounts lying therein by a depositor or his/her nominee/ legal heir in case of deceased depositor.

D. Safe Deposit Lockers / Safe Custody Article Facility

D.1 Board approved policies and SOPs

147. A UCB shall put in place a comprehensive revised Board approved policy and SOPs on safe deposit locker facility / safe custody article as per the instructions mentioned herein.

D.2 Allotment of Lockers

D.2.1 Customer Due Diligence for Lockers

148. The existing customers of a UCB who have made an application for locker facility and who are fully compliant with the customer due diligence criteria under the Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025 may be given the facilities of safe deposit lockers / safe custody article subject to on-going compliance.

149. Customers who are not having any other banking relationship with a UCB may be given the facilities of safe deposit locker / safe custody article after complying with the CDD criteria under the Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025 and subject to on-going compliance. The due diligence shall be carried out for all the customers in whatever rights and capacities they may be hiring the locker.

150. A UCB shall incorporate a clause in the locker agreement that the locker-hirer/s shall not keep anything illegal or any hazardous substance in the Safe Deposit locker. If a UCB suspects the deposit of any illegal or hazardous substance by any customer in the safe deposit locker, it shall have the right to take appropriate action against such customer as it deems fit and proper in the circumstances.

151. A UCB shall obtain recent passport size photographs of locker-hirer(s) and individual(s) authorised by locker hirer(s) to operate the locker and preserve in the records pertaining to locker-hirer being maintained in the UCB’s branch.

D.2.2 Locker Allotment

152. In order to facilitate customers making informed choices, a UCB shall maintain a branch wise list of vacant lockers as well as a waitlist in Core Banking System (CBS) or any other computerised system compliant with Cyber Security Framework issued by RBI, for the purpose of allotment of lockers and ensure transparency in allotment of lockers. A UCB shall acknowledge the receipt of all applications for allotment of locker and provide a waitlist number to the customers, if the lockers are not available for allotment.

D.2.3 Model Locker Agreement

153. A UCB shall have a Board approved agreement for safe deposit lockers. For this purpose, a UCB may adopt the model locker agreement framed by Indian Banks’ Association. The agreement shall be in conformity with the revised instructions and the directions of the Hon’ble Supreme Court in the matter of ‘Amitabha Dasgupta vs United Bank of India’ (Judgment dated February 19, 2021 in CA No. 3966 of 2010). A UCB shall ensure that any unfair terms or conditions are not incorporated in their locker agreements. Further, the terms of the contract shall not be more onerous than required in ordinary course of business to safeguard the interests of the UCB.

154. At the time of allotment of the locker to a customer, a UCB shall enter into an agreement with the customer to whom the locker facility is provided, on a paper duly stamped. A copy of the locker agreement in duplicate signed by both the parties shall be furnished to the locker-hirer to know his/her rights and responsibilities. Original Agreement shall be retained with the UCB’s branch where the locker is situated.

155. There may be instances, where the agreements already executed by a UCB with its locker-hirer(s) are at variance with the revised Indian Banks’ Association Model Agreement. In such cases, all the provisions contained in this section, in particular paragraphs 186 to 188 below on compensation policy / liability of UCBs, shall continue to apply to them even if not explicitly stated in the agreements already executed. Further, in such cases, the UCB shall have the option to execute fresh agreements or revise them through supplementary agreements. The cost of stamp paper in such cases may be borne by the UCB.

156. UCBs were advised to facilitate execution of the fresh / supplementary stamped agreements with all their existing customers on or before December 31, 2023 by taking measures such as arranging stamp papers, franking, electronic execution of agreement, e-stamping, etc. and provide a copy of the executed agreement to the customer.

D.2.4 Locker Rent

157. A UCB may face potential situations where the locker-hirer neither operates the locker nor pays the rent. To ensure prompt payment of locker rent, a UCB is allowed to obtain a Term Deposit, at the time of allotment, which would cover three years’ rent and the charges for breaking open the locker in case of such eventuality. A UCB, however, shall not insist on such Term Deposits from the existing locker holders or those who have satisfactory operative account. The packaging of allotment of locker facility with placement of term deposits beyond what is specifically permitted above will be considered as a restrictive practice.

158. If locker rent is collected in advance, in the event of surrender of a locker by a customer, the proportionate amount of advance rent collected shall be refunded to the customer.

159. If there is any event such as merger / closure / shifting of branch warranting physical relocation of the lockers, a UCB shall give public notice in two newspapers (including one local daily in vernacular language) in this regard and the customers shall be intimated at least two months in advance along with options for them to change or close the facility. In case of unplanned shifting due to natural calamities or any other such emergency situation, a UCB shall make efforts to intimate its customers suitably at the earliest.

D.3 Infrastructure and Security Standards

D.3.1 Security of the Strong Room/Vault

160. A UCB shall take necessary steps to ensure that the area in which the locker facility is housed is properly secured to prevent criminal break-ins. The risks of accessibility of an allotted locker from any side without involvement of the locker-hirer concerned may be assessed and kept on record. A UCB shall have a single defined point of entry and exit to the locker room/vault. The place where the lockers are housed must be secured enough to protect against hazard of rain / flood water entering and damaging the lockers in contingent situations. The fire hazard risks of the area should also be assessed and minimized. A UCB, as per its policy, shall conduct necessary engineering / safety verification regularly to identify the risks and carry out necessary rectification.

161. The area housing the lockers shall remain adequately guarded at all times. A UCB shall install Access Control System, if required as per their risk assessment, which would restrict any unauthorised entry and create digital record of access to locker room with time log. As per its internal security policy, a UCB may cover the entry and exit of the strong room and the common areas of operation under CCTV camera and preserve its recording for a period of not less than 180 days. In case any customer has complained to a UCB that his / her locker is opened without his / her knowledge and authority, or any theft or security breach is noticed / observed, the UCB shall preserve the CCTV recording till the police investigation is completed and the dispute is settled.

162. The security procedures shall be well-documented, and the staff concerned shall be properly trained in the procedure. The internal auditors shall verify and report the compliance to ensure that the procedures are strictly adhered to.

D.3.2 Locker Standards

163. All the new mechanical lockers to be installed by a UCB shall conform to basic standards / benchmarks for safety and security as prescribed by Bureau of Indian Standards (BIS) or any other enhanced industry standards applicable in this regard.

164. In case the lockers are being operated through an electronic system, a UCB shall take reasonable steps to ensure that the system is protected against hacking or any breach of security. The customers’ personal data, including their biometric data, shall not be shared with third parties without their consent. Further, a UCB shall ensure that the electronically operated lockers are compliant with the Cyber Security Framework prescribed by the Reserve Bank. The system shall be capable of maintaining unalterable log of locker activities. A UCB shall comply with the relevant statutory / regulatory instructions / requirements applicable for IT / data protection. Further, a UCB shall also devise a standard operating procedure for issue of new password in lieu of lost passwords to customers in a safe and secure manner in case of electronically operated lockers.

165. A UCB shall ensure that identification Code of the bank / branch is embossed on all the locker keys with a view to facilitating identification of lockers / locker ownership by law enforcement agencies in case of need. Further, the custodian of the locker shall, regularly / periodically, check the keys maintained in the branch to ensure that they are in proper condition. A UCB shall permit the locker-hirer to operate the locker only with the key provided by the UCB, although there is no restriction in allowing the customer to use an additional padlock of her / his own if there are such provisions in lockers.

D.4 Locker Operations

D.4.1 Regular Operations by Customers

166. The locker hirer and/or the persons duly authorised by him/ her only shall be permitted to operate the locker after proper verification of their identity and recording of the authorization by the officials concerned of a UCB. A UCB shall maintain a record of all individuals, including the locker-hirers, who have accessed the lockers and the date and time (both check-in and check-out time) on which they have opened and closed the locker and obtain their signature. The ingress and egress register for access to Vault Room by locker-hirers or any other individual including a UCB’s staff shall be maintained to record the movement of individuals in the Vault Room area with their signatures at appropriate place in the records.

167. A UCB’s officer authorising the locker-hirer to access the locker, after unlocking the first key / password shall not remain present when the locker is opened by the locker-hirer. A UCB shall ensure that there is adequate privacy to the locker-hirers in the operations when customers access the lockers at the same time.

168. A UCB shall send an email and SMS alert to the registered email ID and mobile number of the customer before the end of the day as a positive confirmation intimating the date and time of the locker operation and the redressal mechanism available in case of unauthorized locker access.

D.4.2 Internal Controls by banks

169. There shall be a system of inter change of locks whenever the locker is surrendered by the hirer. The keys of vacant lockers shall be kept in sealed envelopes. The duplicate master keys shall be deposited with another branch a UCB. There shall be proper record of joint custody of master keys. A UCB shall conduct surprise periodic verification of surrendered/vacant lockers and its keys by an officer of the UCB who is not connected with their custody and proper record shall be maintained as a proof of such verification.

170. A UCB shall ensure that the Locker Register and the Locker Key Register are maintained in CBS or any other computerized system compliant with the Cyber Security Framework issued by the Reserve Bank. The Locker Register shall be updated in case of any change in the allotment with complete audit trails.

171. A UCB custodian shall check whether the lockers are properly closed post locker operation. If the same is not done, the lockers must be immediately closed, and the locker-hirer shall be promptly intimated through e-mail, if registered or through SMS, if mobile number is registered or through letter so that they may verify any resulting discrepancy in the contents of the locker. A UCB custodian shall record the fact of not closing the locker properly in the register and its closure by the UCB with the date and time. Further, the custodian of the locker room shall carry out a physical check of the locker room at the end of the day to ensure that lockers are properly closed, and that no person is inadvertently trapped in the locker room after banking hours.

D.5 Closure and Discharge of locker items

172. This part refers to the breaking open of the locker in a manner other than through the normal access by the customer using her/his original key or password under any one of the following circumstances:

(1) if the hirer loses the key and requests for breaking open the locker at her /his cost; or

(2) if the Government enforcement agencies have approached a UCB with orders from the Court or appropriate competent authority to seize lockers and requested for access to the lockers; or

(3) if a UCB is of the view that there is a need to take back the locker as the locker hirer is not co-operating or not complying with the terms and conditions of the agreement.

173. A UCB shall have a clear Board approved policy together with a SOP for breaking open the lockers for all possible situations keeping in view the relevant legal and contractual provisions.

D.6 Discharge of locker contents at the request of customer

174. If the key of the locker, supplied by a UCB is lost by the locker-hirer, the customer (locker hirer) shall notify the UCB immediately. An undertaking may also be obtained from the customer that the key lost, if found in future, will be handed over to the UCB. All charges for opening the locker, changing the lock and replacing the lost key may be recovered from the hirer. The charges applicable for replacement of lost keys / issue of new password shall be communicated to the locker hirer.

175. The opening of the locker has to be carried out by a UCB or its authorised technician only after proper identification of the hirer, proper recording of the fact of loss and written authorisation by the customer for breaking open the locker.

176. The operation shall be done in the presence of the customer/s and an authorised official of a UCB. It has to be ensured that the adjoining lockers are not impacted by any such operations and the contents of the lockers are not exposed to any individual other than the locker-hirer during the break-up or restoration process.

D.6.1 Attachment and recovery of contents in a Locker and the Articles in the safe custody of A UCB by any Law Enforcement Authority

177. In case of attachment and recovery of the contents in a locker of a customer or the articles left by a customer for safe custody of a UCB by any Authority acting either under the orders of a Court or any other competent authority vested with the power to pass such orders, a UCB shall co-operate in execution and implementation of the orders.

178. A UCB shall verify and satisfy itself about the orders and the connected documents received for attachment and recovery of the contents in a locker or articles in the safe custody of the bank. The customer (locker-hirer) shall be informed by letter as well as by email / SMS to the registered email address / mobile phone number that the Government Authorities have approached for attachment and recovery, or seizure of the locker or articles deposited for safe custody. An inventory of the contents of locker and articles seized and recovered by the Authority shall be prepared in the presence of such Government Authorities, two independent witnesses and an officer of the UCB and shall be signed by all. A copy of the inventory may be forwarded to the customer to the address available in the UCB’s records or handed over to the customer against acknowledgement.

179. A UCB shall also record a video of the break-open process and the inventory assessment, wherever legally permissible, and preserve the video to produce as evidence in case of any dispute or Court or fraud case in future.

D.7 Discharge of locker contents by banks due to non-payment of locker rent

180. A UCB shall have the discretion to break open any locker following due procedure if the rent has not been paid by the customer for three years in a row. A UCB shall ensure to notify the existing locker-hirer prior to any changes in the allotment and give him / her reasonable opportunity to withdraw the articles deposited by him/her. A clause may be incorporated in the locker agreement to this effect.

181. Before breaking open the locker, a UCB shall give due notice to the locker-hirer through a letter and through email and SMS alert to the registered email address and mobile phone number. If the letter is returned undelivered or the locker-hirer is not traceable, a UCB shall issue public notice in two newspaper dailies (one in English and another in local language) giving reasonable time to the locker-hirer or to any other person/s who has interest in the contents of locker to respond. The locker shall be broken open in the presence of an officer of the UCB and two independent witnesses. In case of electronically operated lockers (including Smart Vaults), the use of ‘Vault Administrator’ password for opening of locker shall be assigned to a senior official and complete audit trail of access shall be preserved. Further, a UCB shall also record a video of the break open process together with inventory assessment and its safe keep and preserve the same so as to provide evidence in case of any dispute or Court case in future. A UCB shall also ensure that the details of breaking open of locker is documented in CBS or any other computerised systems compliant with the Cyber Security Framework issued by RBI, apart from locker register.

182. After breaking open of locker, the contents shall be kept in sealed envelope with detailed inventory inside fireproof safe in a tamper-proof way until customer claims it. A record of access to the fireproof safe shall invariably be maintained. While returning the contents of the locker, a UCB shall obtain acknowledgement of the customer on the inventory list to avoid any dispute in future.

183. A UCB shall ensure that the inventory prepared after breaking open of the locker and during settlement of claims, is as per Annex III (effective till March 31, 2026) or Annex XII (effective on or after April 1, 2026, or if implemented earlier by the UCB) or as near thereto as circumstances require. Further, a UCB shall not open sealed / closed packets left with them for safe custody or found in locker while releasing them to the nominee(s) and surviving locker hirers / depositor of safe custody article, unless required by law.

D.7.1 Discharge of locker contents if the locker remains inoperative for a long period of time

184. If the locker remains inoperative for a period of seven years and the locker-hirer cannot be located, even if rent is being paid regularly, a UCB shall be at liberty to transfer the contents of the locker to their nominees / legal heir or dispose of the articles in a transparent manner, as the case may be. Before breaking open the locker, a UCB shall follow the procedure as prescribed in paragraphs 181 to 183 above. A UCB shall ensure that the procedure to be followed by them for disposal of the articles left unclaimed for a reasonably long period of time as mentioned above is incorporated in their locker agreement.

185. A UCB shall ensure that appropriate terms are inserted in the locker agreement executed with the customer specifying the position in case the locker is not in operation for long period. A clause may also be incorporated in the locker agreement to discharge the UCB from liability in case the locker is not in operation and the locker is opened by the UCB and contents are released as per law and as per the instructions issued by the Reserve Bank and the terms and conditions prescribed in the agreement.

D.8 Compensation Policy / Liability for Banks

D.8.1 Liability of a UCB

186. A UCB shall put in place a detailed Board approved policy outlining the responsibility owed by them for any loss or damage to the contents of the lockers due to its negligence as a UCB owes a separate duty of care to exercise due diligence in maintaining and operating its locker or safety deposit systems. The duty of care includes ensuring proper functioning of the locker system, guarding against unauthorised access to the lockers and providing appropriate safeguards against theft and robbery. Further, a UCB shall adhere to the Master Directions on Fraud Risk Management for reporting requirements about the instances of robberies, dacoities, thefts and burglaries.

D.8.2 Liability of a UCB arising from natural calamities like earthquake, flood, thunderstorm, lightning etc. or due to sole negligence of the customer

187. A UCB shall not be liable for any damage and/or loss of contents of locker arising from natural calamities or Acts of God like earthquake, floods, lightning and thunderstorm or any act that is attributable to the sole fault or negligence of the customer. A UCB shall, however, exercise appropriate care to its locker systems to protect its premises from such catastrophes.

D.8.3 Liability of a UCB arising from events like fire, theft, burglary, dacoity, robbery, building collapse or in case of fraud committed by the employees of a UCB

188. It is the responsibility of a UCB to take all steps for the safety and security of the premises in which the safe deposit vaults are housed. It has the responsibility to ensure that incidents like fire, theft/ burglary/ robbery, dacoity, building collapse do not occur in the UCB’s premises due to its own shortcomings, negligence and by any act of omission/commission. As a UCB cannot claim that they bear no liability towards their customers for loss of contents of the locker, in instances where loss of contents of locker are due to incidents mentioned above or attributable to fraud committed by its employee(s), the UCB’s liability shall be for an amount equivalent to one hundred times the prevailing annual rent of the safe deposit locker.

D.9 Risk Management, Transparency and Customer Guidance

D.9.1 Branch Insurance Policy

189. A UCB, with the approval of its Board, shall have a branch insurance policy to minimize the loss due to incidents like robbery, fire, natural calamities, loss during shifting/merger of branch, etc., affecting contents of lockers.

D.9.2 Insurance of locker contents by the customer

190. A UCB shall clarify in its locker agreement that as it does not keep a record of the contents of the locker or of any articles removed therefrom or placed therein by the customer, they would not be under any liability to insure the contents of the locker against any risk whatsoever. A UCB shall under no circumstances offer, directly or indirectly, any insurance product to its locker hirers for insurance of locker contents.

D.9.3 Customer guidance and publicity

191. A UCB shall display the model locker agreement with all the Terms & Conditions and the SOPs on various aspects on its website and/or at branches (if official website is not available) where locker facility is being provided by them for public viewing. A UCB shall ensure that the customers are made aware of its terms and conditions to avail those facilities.

192. A UCB shall display updated information on all kinds of charges for safe deposit lockers and safe custody articles on its website.

193. A UCB shall place on its website, the instructions together with the policies / procedures put in place for giving access of the locker / safe custody article to the nominee(s) / survivor(s) / legal heir(s) of the deceased locker hirer / safe custody article. Further, a printed copy of the same shall also be given to the nominee(s) / survivor(s) / legal heir(s).

E. Nomination Facility in Deposit Accounts, Safe Deposit Lockers and Articles kept in Safe Custody

194. The Government of India has notified the Banking Laws (Amendment) Act, 2025 which inter-alia has amended the Sections 45ZA, 45ZC and 45ZE of the Banking Regulation Act, 1949 (the Act). The Banking Companies (Nomination) Rules, 2025 (the Rules) have also been notified which along with amended provisions of the Act came into force from November 1, 2025. Accordingly, these directions are issued to banks to implement the nomination facility and shall be read with sections 45ZA to 45ZG of the Banking Regulation Act, 1949 (read with section 56 of the Act ibid) and the Nomination Rules framed thereunder.

E.1 Nomination Facility

195. A UCB shall offer nomination facility in deposit accounts in accordance with the provisions of sections 45ZA, 45ZB and 45ZG of the Act (read with section 56 of the Act) and the Rules.

196. An UCB shall be guided by the provisions of sections 45ZC to 45ZG of the Act (read with section 56 of the Act) and the Rules in the matter of nomination in safe deposit lockers and articles kept in safe custody.

Explanation: For the purpose of these Directions, it is clarified that if an individual is keeping an account for his/ her proprietorship business, it will be deemed as that individual’s account and the nomination facility shall be offered in such accounts.

E.2 Option to the customers not to make a nomination

197. At the time of account opening, a UCB shall explicitly inform the prospective customer of the availability and purpose of the nomination facility and offer him/her the option to avail the same. The UCB shall also clearly explain to the prospective customer the advantages of the nomination facility, including but not limited to simplification of the claim process in the event of the account holder’s demise and facilitation of smooth and prompt transfer of funds to the nominee without legal complications.

198. If the prospective customer chooses not to avail the nomination facility despite being fully informed, the UCB shall proceed to open the deposit account without imposing any restrictions, if otherwise found eligible, after obtaining a written declaration from the individual confirming that he/ she does not require the nomination facility at the time of account opening. If he/she refuses to provide the written declaration, a UCB shall record the fact of refusal to submit written confirmation in the account opening records.

199. Under no circumstances shall a prospective customer be denied or delayed in opening an account solely on the ground of refusal to make a nomination, provided all other requirements for account opening are satisfactorily met.

E.3 Incidental Matters

200. In case of simultaneous nomination, if any nominee dies prior to receiving the deposit from a UCB, the nomination in respect of such nominee alone shall become ineffective. Accordingly, a UCB shall settle the claims of the amount of deposit made in favour of such nominee in accordance with provisions applicable for accounts without nominee clause as contained in paragraphs 217 to 224 of these Directions.

201. A UCB cannot claim a valid discharge under the provisions of the Act if payments are made to individuals based on nomination made under any other law for specified purposes.

202. A UCB shall have in place appropriate systems and procedures to register in its books the registration, cancellation and variation of the nomination, as per the request of the customers.

203. A UCB shall devise proper systems for acknowledging the receipt of the duly completed forms of registration, cancellation and / or variation of the nomination.

204. A UCB shall verify and ensure that the nomination(s) made by its customers are in accordance with relevant provisions of the Act and the Rules before providing acknowledgement to them.

205. Such acknowledgement shall be given to the customers within three working days of receiving the forms of registration, cancellation and/ or variation of nomination, irrespective of whether the same is asked for by the customers.

206. Where a nomination request is found not to be in conformity with the provisions of the Act or the Rules and is consequently rejected, a UCB shall inform the customer in writing, clearly indicating the reasons for such rejection, within three working days of the receipt of the request form.

E.4 Details of nomination and name of nominee in Passbook / Statement of Account and TDR

207. A UCB shall record the status regarding registration of nomination on the face of the Passbook / Statement of Account and TDR, with the legend "Nomination Registered".

208. A UCB shall also indicate the name of the Nominee(s) in the Passbook / Statement of Accounts and TDR in such cases.

E.5 Customer guidance and publicity of benefits of nomination

209. A UCB shall give wide publicity and provide guidance to deposit account holders, locker hirers and depositors of articles in safe custody on the benefits of the nomination facility. This may include printing compatible messages on cheque book, passbook and other literature reaching the customers as well as launching periodical awareness drives.

210. A UCB shall ensure that the form for opening deposit accounts, hiring safe deposit lockers and depositing articles in safe custody contains space for getting the details of nomination, which also serves the purpose of educating the customers about availability of such facility.

F. Settlement of Claims in respect of deceased customers

211. The current instructions in respect of Settlement of Claims are provided in Annex IV, which shall continue to be applicable till a UCB implements directions provided in this section. The revised instructions shall be implemented as expeditiously as possible but not later than March 31, 2026. The instructions in Annex IV shall cease to be applicable once the revised directions are implemented by the UCB.

212. The directions given in the section shall not be applicable in case of Government savings schemes administered by banks such as Senior Citizen Savings Scheme (SCSS), Public Provident Fund (PPF), etc. Settlement of claims in such cases shall be as per the provisions of the respective schemes.

213. For the limited purpose of directions in this section, unless the context otherwise requires, the following definitions shall apply:

(1) ‘Customer’ refers to a person who may be a depositor or a locker hirer or has placed articles in safe custody with a bank.

(2) ‘Depositor’ refers to an individual(s) who has any type of deposit account with a bank such as Savings account, Current account, Term Deposit account, etc.

(3) ‘Threshold limit’ means Rs5 lakh or such higher limit as may be fixed by a UCB.

F.1 Settlement of claims in Deposit Accounts of Deceased Depositor

F.1.1 Deposit Accounts with Nominee / Survivorship clause

214. A deposit account where a depositor had made nomination in terms of the provisions of The Banking Regulation Act, 1949 or where the account was opened with survivorship clause, the payment of the outstanding balance upon the death of the depositor(s) to the nominee(s) / survivor(s) shall be considered a valid discharge of a UCB’s liability, provided:

(1) The UCB has exercised due care and caution in establishing the identity of the nominee(s) / survivor(s) and the deceased status of the account holder(s) by obtaining appropriate documentary evidence (physical or equivalent e-document);

(2) There is no order from the competent court in the knowledge of the UCB, as on the date of settlement / payment, restraining the nominee(s) / survivor(s) from receiving or the UCB from making the payment from the account of the deceased depositor(s); and

(3) It has been made clear in writing to the nominee(s) / survivor(s) that they would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor(s), i.e., such payment to them shall not affect the right or claim which any person may have against the nominee(s) / survivor(s) to the extent of the payment made to them.

215. In the case of a joint deposit account with or without survivorship clause, the nominee's right arises only after the death of all the depositors.

216. Payment made to the nominee(s) / survivor(s), subject to the foregoing conditions, shall constitute a full and valid discharge of a UCB's liability. Therefore, in such cases, while making payment to the nominee(s) / survivor(s) of the deceased depositor(s), a UCB shall not insist on production of legal documents such as Succession Certificate, Letter of Administration, Probate of Will, etc., or seek any bond of indemnity / surety from the nominee(s) / survivor(s) / third-party, irrespective of the amount standing to the credit of the deceased account holder(s). A UCB shall require submission of the following documents in such cases:

(1) Death certificate of the deceased depositor(s); and

(2) Claim form, as given in Annex V, duly signed by the nominee(s)/ survivor(s);

(3) Claim form, as given in Annex V, duly signed by the nominee(s) / survivor(s);

(4) Death certificate of the deceased depositor(s); and

(5) Officially Valid Document of the nominee / survivor towards verifying her / his identity and address.

F.1.2 Deposit Accounts without Nominee / Survivorship clause

F.1.2.1 Simplified Procedure

217. Keeping in view the imperative need to avoid inconvenience and undue hardship to the legal heir(s) / claimant(s), a UCB shall follow a simplified procedure for settlement of claims in respect of deposit accounts where the aggregate amount payable, including accrued interest, as on the date of the application is less than the threshold limit, provided

(1) a deceased depositor(s) had not made any nomination or in case of a joint account, the account was without nominee / survivorship clause,

(2) there is no Will left behind by the deceased depositor(s),

(3) there is no contesting claim, and

(4) there is no order from a competent court in the knowledge of the UCB, restraining the claimant(s) from receiving nor the UCB from making the payment.

F.1.2.1.1 Claim amount up to the threshold limit

218. A UCB shall settle the claim up to the threshold limit based on

(1) Claim form, as given in Annex VI duly filled in and signed by the claimant(s) other than those who have signed the letter of disclaimer/ no objection;

(2) Death certificate of the deceased depositor(s);

(3) Officially Valid Document of the claimant(s) towards verifying his/ her identity and address;

(4) Bond of indemnity, as given in Annex VII, signed by the claimant(s);

(5) Letter of disclaimer / no objection, as given in Annex VIII from non-claimant legal heir(s), if applicable; and

(6) Legal Heir Certificate issued by a competent authority;

OR

Declaration, as given in Annex IX, regarding the legal heir(s) of the deceased depositor(s) by an independent person who is well known to the family of the deceased, is not a party to the claim and is acceptable to the UCB.

219. No bond of surety from a third-party shall be obtained in case of claims up to the threshold limit.

F.1.2.1.2 Claim amount above the threshold limit

220. In cases where claim amount is above the threshold limit, a UCB shall settle the claim based on:

(1) Succession Certificate and documents mentioned at paragraph 218 (1) to (3) above;

OR

(2) Legal Heir Certificate issued by a competent authority; or Affidavit, as given in Annex IX, sworn before a Notary Public / Judge / Judicial Magistrate regarding the legal heir(s) of the deceased depositor, by an independent person who is well known to the family of the deceased, is not a party to the claim and is acceptable to the UCB.

In such cases, a UCB shall call for the documents at paragraph 218 (1) to (5) above. A UCB may also call for a bond of surety, as given in Annex VIII, from third-party individuals (which may include non-claimant legal heir(s)) who are acceptable to the UCB and good for the claim amount.

F.1.2.2 Settlement of Claims not falling under the Simplified Procedure

F.1.2.2.1 Claims involving ‘Will’ without any dispute

221. A UCB shall settle claims involving ‘Will’ left behind by a deceased depositor on the basis of Probate of Will / Letter of Administration, as applicable, in addition to documents mentioned at paragraph 218 (1) to (3) above. In cases where a person other than a legal heir is named as a beneficiary in the Will, applicable documents shall also be obtained from her / him.

222. However, a UCB is free to exercise discretion and act as per ‘Will’ of the deceased without requiring production of the probate of such Will, provided the same is not inconsistent with applicable laws, there is no dispute regarding the Will amongst the legal heir(s) and / or beneficiaries named in the Will and the UCB is otherwise satisfied as to the genuineness of the Will. In such cases, the UCB shall additionally call for the documents mentioned at paragraph 218 (4) and (5) above.

F.1.2.2.2 Cases involving contesting claims/ dispute

223. In case of contesting claims or dispute amongst the legal heir(s) and / or the beneficiaries named in the Will of the deceased depositor, a UCB shall settle claims on the basis of Probate of Will or Letter of Administration or Succession Certificate or Court order / decree, as applicable, and the documents mentioned at paragraph 218 (1) to (3) above. Further, where there is an order from a Court restraining a UCB from making the payment, the claim shall not be entertained during the period the order is in force. The settlement of claim shall be considered based on subsequent Court order to that effect.

224. No bond of surety shall be insisted from a third party in cases falling under either F.1.2.2.1 or F.1.2.2.2 above.

F.1.3 Treatment of credits in the name of a deceased depositor post settlement

225. Post settlement of the deposit account(s), in case any credit is received in the name of a deceased depositor, a UCB shall return the same to the remitter with the remark 'Account holder deceased' and intimate the nominee(s) / survivor(s) / legal heir(s).

F.1.4 Premature Termination of term deposit accounts

226. A UCB shall incorporate a clause in the account opening form itself to the effect that in the event of death of the depositor, premature termination of term deposits would be allowed without any penal charge, even if the deposit is within the lock-in-period.

227. Premature termination of term deposits opened jointly, with or without survivorship clause, shall require the consent of the surviving depositors and the legal heir(s) of the deceased joint holder, in case of death of one of the depositors. However, in case of joint accounts with survivorship clause, if a specific mandate is furnished by all the depositors jointly to a UCB, either at the time of placing the term deposit or anytime subsequently during the tenure of the deposit, then premature withdrawal option shall be allowed to the survivors on the death of any of the depositors, without seeking the concurrence of the legal heir(s) of the deceased joint deposit holder.

F.1.5 Settlement of Claims in respect of missing persons

228. The nominee(s) / legal heir(s) of a missing person shall be required to get an order from the competent court under the provisions of Sections 110 or 111 of the Bharatiya Sakshya Adhiniyam, 2023. The claim in respect of such missing person shall be settled as per the procedure applicable for settlement of claims in respect of a deceased customer. In such cases, a copy of the court order declaring the civil death of the account holder shall be obtained in lieu of the death certificate. However, to avoid inconvenience and undue hardship to the common person where the aggregate amount payable, including accrued interest, as on the date of the application is less than Rs1 lakh or such higher amount as may be fixed by the bank, a copy of the First Information Report (FIR) and non-traceable report issued by police authorities shall be obtained in lieu of death certificate or an order from a competent court declaring the civil death of the account holder for settling the claim.

F.2 Settlement of Claims in Safe Deposit Locker and Articles in Safe Custody by Deceased Customer

F.2.1 Claims with Nominee / Survivorship Clause

229. If a sole locker hirer nominates an individual(s) to receive the contents in the locker in case of her / his death, a UCB shall give access of the locker to such nominee(s) with liberty to remove the contents of the locker.

230. In case the locker was hired jointly with the instructions to operate it under joint signatures, and the locker hirers nominate any other individual(s), in the event of death of any of the locker hirers, a UCB shall give access of the locker and the liberty to remove the contents jointly to the nominee(s) and the survivor(s).

231. In case the locker was hired jointly with survivorship clause and the hirers instructed that the access of the locker should be given to "either or survivor", "anyone or survivor" or "former or survivor" or according to any other survivorship clause permissible under the provisions of the Banking Regulation Act, 1949, a UCB shall follow the mandate in the event of death of one or more of the joint locker hirers.

232. In case of a minor nominee, a UCB shall ensure that, the contents of locker, when sought to be removed on behalf of the minor nominee, are handed over to the guardian whose details have been provided in the nomination form. If the details of the guardian have not been provided in the nomination form, a UCB shall hand over the contents of the locker to a person who is, in law, competent to receive the contents of safe deposit locker on behalf of such minor.

233. The following documents shall be obtained by a bank for processing the claim in cases falling under paragraphs 229 and 230 above:

(1) Claim form, as given in Annex V, duly signed by the nominee(s)/ survivor(s);

(2) Death certificate of the safe deposit locker hirer(s); and

(3) Officially Valid Document of the nominee/ survivor towards verifying her/ his identity and address.

234. A UCB shall, however, ensure the following before giving access to the contents to the nominee(s) / survivor(s):

(1) Exercise due care and caution in establishing the identity of the nominee(s) / survivor(s) and deceased status of the locker hirer(s) by obtaining appropriate documentary evidence (physical or equivalent e-document);

(2) There is no order or direction as on date from a Court/ Forum in the knowledge of a UCB, restraining the nominee(s) / survivor(s) from having access or a UCB from giving access to the locker of the deceased hirer(s) and liberty to remove the contents of such locker; and

(3) Make it clear to the nominee(s) / survivor(s) that access and liberty to remove the contents of the locker is given to them only as a trustee of the legal heir(s) of the deceased locker hirer(s), i.e., such access and liberty to remove the contents given to them shall not affect the right or claim which any person may have against the nominee(s) / survivor(s) to whom the access is given.

235. After receipt of the documents mentioned at paragraph 234 above and being satisfied to the genuineness of the claim, a UCB shall correspond with the nominee(s) / survivor(s) in writing and fix a date and time for making an inventory of the contents of the safe deposit locker. The same shall be undertaken in the presence of the nominee(s) and / or survivor(s) and / or their authorised representatives, two independent witnesses (should not be employee or ex-employee of the UCB), the safe deposit vault custodian and another employee of a UCB not associated with locker operations, and recorded as per the inventory form given in Annex X. A UCB shall then hand over the possession of the contents of the locker to the nominee(s) / survivor(s) / the person competent to receive the contents on behalf of the minor, as the case may be, and obtain an acknowledgment, as given in Annex X, that all the contents in the locker of the deceased hirer(s) have been removed and the locker is empty, and they have no objection to allotment of the locker to any other locker hirer as per norms of the UCB.

236. Production of legal documents, viz., Succession Certificate, Letter of Administration, Probate of Will, etc., or Bond of indemnity from the nominee(s) / survivor(s) shall not be required unless there is any discrepancy in nomination.

237. Procedure, as prescribed in paragraphs 229 to 236 above, shall be followed mutatis mutandis for return of articles kept by the deceased customer in the safe custody of a UCB. However, inventory form given in Annex X shall be used in such cases.

F.2.2 Cases without nominee / survivorship clause

F.2.2.1 Settlement of claims falling under the simplified procedure

238. Keeping in view the imperative need to avoid inconvenience and undue hardship to the legal heir(s) / claimant(s), a UCB shall adopt a simplified procedure for settlement of claims in safe deposit lockers provided there is no dispute amongst the legal heir(s) / claimant(s) and

(1) the deceased locker hirer(s) had not made any nomination, or

(2) the joint hirers had not given any mandate that the access may be given to one or more of the survivors by a clear survivorship clause, or

(3) there is no ‘Will’ left behind by the deceased locker hirer.

239. In cases falling under the simplified procedure, a UCB shall obtain the following documents to settle the claim without obtaining any legal documents such as Succession Certificate, Letter of Administration, Court order, etc.

(1) Claim form, as given in Annex VI, duly filled and signed by the claimant legal heir(s);

(2) Death certificate of the safe deposit locker hirer(s);

(3) Officially Valid Document of the claimant(s) towards verifying her/ his identity and address;

(4) Letter of disclaimer/ no objection, as given in Annex VIII, from non-claimant legal heir(s), if applicable; and

(5) Legal Heir Certificate issued by a competent authority or Affidavit, as given in Annex IX, sworn before a Notary Public / Judge / Judicial Magistrate regarding the legal heir(s) of the deceased locker hirer(s) by an independent person who is well known to the family of the deceased, is not a party to the claim and is acceptable to the UCB.

F.2.2.2 Settlement of Claims not falling under the Simplified Procedure

F.2.2.2.1 Claims involving ‘Will’ without any dispute

240. A UCB shall settle claims involving ‘Will’ left behind by a deceased safe deposit locker hirer on the basis of Probate of Will / Letter of Administration, as applicable, in addition to documents mentioned at paragraph 239 (1) to (3) above. In cases where a person other than a legal heir is named as a beneficiary in the Will, applicable documents shall also be obtained from her/ him.

241. However, the UCB may exercise discretion and act as per ‘Will’ of the deceased without requiring production of the probate of such Will, provided the same is not inconsistent with applicable laws, there is no dispute regarding the Will amongst the legal heir(s) and/ or beneficiaries named in the Will and the UCB is otherwise satisfied as to the genuineness of the Will. In such cases, the UCB shall additionally call for the documents mentioned at paragraph 239 (4) and (5) above.

F.2.2.2.2 Cases involving contesting claims / dispute

242. Cases involving dispute amongst the legal heir(s) and/ or beneficiaries named in the Will, as applicable, shall be settled based on Probate of Will or Succession Certificate or Letter of Administration or Court order/ decree, as the case may be, and the documents mentioned at paragraph 239 (1) to (3) above.

F.2.3 Procedure for taking inventory of contents of safe deposit locker

243. After receipt of the required documents in claims falling under categories at F.2.2.1 and F.2.2.2 above and being satisfied to the genuineness of the claim, a UCB shall correspond with the claimant(s) in writing and fix a date and time for making an inventory of the contents of the safe deposit locker, as given in form prescribed in Annex X, in the presence of all claimant(s) or their duly authorised representatives, two independent witnesses (should not be employee or ex-employee of the UCB), the safe deposit vault custodian and another employee of the UCB not associated with locker operations. Valuation of the contents of the safe deposit locker shall be carried out by an independent valuer and recorded in the Bond of Indemnity as given in Annex VII. The claimant(s) or their duly authorised representative(s) may remove the contents of the locker subsequent to submission of the Bond of Indemnity. Bond of Indemnity shall not be required to be given in cases of claims settled on the basis of legal documents such as Probate of Will or Succession Certificate or Letter of Administration or Court order/ decree, etc.

244. Procedure, as prescribed in paragraphs 239 to 243 above, shall be followed mutatis mutandis for return of articles kept by the deceased customer in the safe custody of a UCB. However, inventory form given in Annex X, shall be used in such cases.

F.3 Standardisation of procedure for submission of claims

245. A UCB shall use the standardised forms for receiving the claims and other documents as per the formats provided in Annex V to Annex XII.

246. The standardised forms and other documents required for settlement of claims with respect to the deposit accounts / safe deposit locker / articles in safe custody kept by a deceased customer shall be made available in all the branches as well as on the UCB’s website for the convenience of the claimant(s). Further, the UCB shall also display on its website, the list of documents to be submitted by a claimant and the procedure to be followed for settlement of claims in various scenarios.

247. A claimant shall be allowed to lodge the claim at any of the branches against acknowledgment. In case all required documents for processing of the claim have been submitted by the claimant, a UCB shall also issue a confirmation in this regard. However, in case of any pending or incomplete / incorrect documents, the UCB shall intimate the claimant about the list of such documents while acknowledging the receipt of claim. On subsequent submission of all the required documents, the UCB shall issue a confirmation to the claimant that all required documents have been received for processing of the claim.

248. A UCB may provide the facility for online lodgement of such claims. Upon a claimant uploading the claim form along with the required documents, a UCB shall send acknowledgement / confirmation through appropriate channels and also make available the provision for online tracking of the status of the claim. In such cases, if a UCB requires the claimant to produce original documents for submission / verification, the same shall be allowed to be done at any of its branches.

F.4 Time limit for settlement of claims

249. A UCB shall settle a claim in respect of deposit accounts of a deceased customer within a period not exceeding 15 calendar days from the date of receipt of all the required documents associated with the claim.

250. In case of safe deposit locker / articles in safe custody, a UCB shall, within 15 calendar days of receipt of all the required documents, process the claim and communicate with the claimant(s) for fixing the date for making inventory of the locker / articles in safe custody.

F.5 Compensation for delay in settlement of claims

251. If any deposit related claim is not settled within the timeframe stipulated at paragraph 249 above, then a UCB shall communicate the reasons for such delay to the claimant(s). Further, in cases of delay attributable to the UCB, compensation shall be paid by the UCB in the form of interest, at a rate not less than the prevailing Bank Rate + 4% per annum, on the settlement amount due for the period of delay. The reference date for reckoning the amount due and the prevailing Bank Rate shall be the date of receipt of all required documents from the claimant.

252. For claims related to safe deposit locker / articles in safe custody, a UCB shall be required to pay compensation to the claimant(s) at the rate of Rs5,000 for each day of delay, in cases where it doesn’t adhere to the timeline prescribed in paragraph 250 above.

F.6 Settlement of claims in respect of deposit accounts of a sole proprietary concern

253. Nomination facility is also available in respect of deposits held in the name of a sole proprietary concern. Accordingly, a UCB shall follow the procedure for settlement of claims in respect of such accounts as has been prescribed above for the accounts with/ without nominee/ survivorship clause, as applicable.

F.7 Modes for Certification of ‘proof of death’ document issued outside India

254. In cases involving death of a customer outside India, ‘proof of death’ document is issued by an authority outside the country. In such cases, a UCB shall accept the original certified copy of the document issued for ‘proof of death’, certified in the country of its issuance in any one of the following modes:

(1) authorised officials of overseas branches of Scheduled Commercial Banks registered in India; or

(2) branches of overseas banks with whom Indian banks have correspondent banking relationships; or

(3) a Court Magistrate or Judge or Notary Public; or

(4) consularised by Indian Embassy/ Consulate General in the country of issuance; or

apostilled.

F.8 Customer Guidance and Publicity

255. A UCB shall continue to spread awareness among its customers about the benefits of the nomination facility / survivorship clause and give wide publicity to these facilities along with the procedure for settlement of claims.

Chapter VIII – Responsible Lending Conduct

A. Key Facts Statement (KFS) for Loans & Advances

256. The following instructions shall be applicable in cases of all retail and MSME term loan products extended by a UCB. Credit card receivables are exempted from the provisions given below:

(1) A UCB shall provide a KFS to all prospective borrowers to help them take an informed view before executing the loan contract, as per the standardised format given in the Annex XIII. The KFS shall be written in a language understood by such borrowers. Contents of KFS shall be explained to the borrower and an acknowledgement shall be obtained that they have understood the same.

(2) The KFS shall be provided with a unique proposal number and shall have a validity period of at least three working days for loans having tenor of seven days or more, and a validity period of one working day for loans having tenor of less than seven days.

Explanation: Validity period refers to the period available to the borrower, after being provided the KFS by the UCB, to agree to the terms of the loan. A UCB shall be bound by the terms of the loan indicated in the KFS, if agreed to by the borrower during the validity period.

(3) The KFS shall also include a computation sheet of annual percentage rate (APR), and the amortisation schedule of the loan over the loan tenor. APR will include all charges which are levied by a UCB. Illustrative examples of calculation of APR and disclosure of repayment schedule for a hypothetical loan are given below:

(i) Illustration for computation of APR for Retail and MSME loans

* The difference in repayment amount calculated from the total of instalments given under the detailed repayment schedule i.e., Rs23,280 (=970*24) vis-à-vis the amount of Rs23,274 (Rs20,000 (loan amount) + Rs3,274 (Interest charges) mentioned under (8) is due to rounding off the instalment amount of Rs969.73 to Rs970 under the detailed repayment schedule.

(ii) Illustrative Repayment Schedule under Equated Periodic Instalment for the above-mentioned hypothetical loan

(1) Charges recovered from the borrowers by a UCB on behalf of third-party service providers on actual basis, such as insurance charges, legal charges etc., shall also form part of the APR and shall be disclosed separately. In all cases wherever a UCB is involved in recovering such charges, the receipts and related documents shall be provided to the borrower for each payment, within a reasonable time.

(2) Any fees, charges, etc. which are not mentioned in the KFS, cannot be charged by a UCB to the borrower at any stage during the term of the loan, without explicit consent of the borrower.

(3) The KFS shall also be included as a summary box to be exhibited as part of the loan agreement.

B. Penal Charges in Loan Accounts

257. A UCB shall adhere to following instructions for charging penal charges on loans. These instructions shall be applicable to all credit facilities offered by the UCB including Cash Credit, Overdraft, securitisation and co-lending portfolios, etc. However, these instructions shall not apply to Credit Cards, External Commercial Borrowings, Trade Credits (rupee / foreign currency export credit) and Structured Obligations which are covered under product specific directions, as also other foreign currency loans.

(1) Penalty, if charged, for non-compliance of material terms and conditions of loan contract by the borrower shall be treated as ‘penal charges’ and shall not be levied in the form of ‘penal interest’ that is added to the rate of interest charged on the advances. There shall be no capitalisation of penal charges, i.e., no further interest computed on such charges. However, this will not affect the normal procedures for compounding of interest in the loan account. Therefore, a UCB may charge interest on unpaid interest (including on unpaid EMI) at the contracted rate of interest till the date of remediation, and not at the penal rate of interest.

Notes:

(i) The material terms and conditions shall be defined, if not already done, as per the credit policy of a UCB and it may vary from one category of loan to another, and also, from lender to lender based on its own assessment.

(ii) Default in repayment by the borrower is also a type of non-compliance of material terms and conditions of loan repayment contract by the borrower and penalty, if charged, for such default shall only be levied in the form of penal charges and not penal interest. Such penal charges shall be reasonable and levied by the lenders only on the amount under default in a non-discriminatory manner as per their Board approved policy. Further, it shall be ensured that there is no capitalization of the penal charges i.e., no further interest computed on such charges.

(iii) Additional / fresh penal charges cannot be levied on the earlier outstanding amount of penal charges.

(iv) A UCB shall follow the instructions and clarifications, if any, issued by Central Board of Indirect Taxes & Customs (CBIC) with regard to applicability of GST on penal charges.

(v) In case of a funded facility created on account of invocation of BG / devolvement of LC, a UCB may charge an appropriate rate of interest on the devolved amount taking into account the associated credit risk premium as per the UCB's credit underwriting policy. However, penalty, if any, on that funded facility on account of non-repayment by the borrower within the due date may only be levied in the form of penal charges and not penal interest.

(vi) In respect of NPA accounts, penal charges shall be reversed to the extent it remains uncollected for the specific purpose of non-recognition of income. However, the same shall be part of the total liability of the borrower to the bank, unless it is waived as per the UCB's Board approved policy.

(vii) A UCB shall disclose fees and charges, including penal charges, recovered from customers in 'Schedule 14: Other Income'.

(2) A UCB shall not introduce any additional component to the rate of interest and ensure compliance to these instructions in both letter and spirit.

(3) A UCB shall formulate a Board approved policy on penal charges or similar charges on loans, by whatever name called.

(4) The quantum of penal charges shall be reasonable and commensurate with the non-compliance of material terms and conditions of loan contract without being discriminatory within a particular loan / product category.

Notes:

(i) The penal charges can be different within the same product category depending upon the amount of loan and a UCB may adopt a suitable structure of penal charges subject to adherence to the above stipulations. The structure of penal charges within a particular loan / product category shall have to be uniform irrespective of the constitution of the borrower.

(ii) Although no upper limit / cap for penal charges has been prescribed, the bank, while formulating its Board approved policy on penal charges, should keep in mind that the intent of levying penal charges is essentially to inculcate a sense of credit discipline and such charges are not meant to be used as a revenue enhancement tool.

(5) The penal charges in case of loans sanctioned to ‘individual borrowers, for purposes other than business’, shall not be higher than the penal charges applicable to non-individual borrowers for similar non-compliance of material terms and conditions.

(6) The quantum and reason for penal charges shall be clearly disclosed by a UCB to the customers upfront in the loan agreement and KFS as applicable, in addition to being displayed on the UCB’s website under Interest rates and Service Charges. Further, providing a reference to the schedule of penal charges displayed on the website of a UCB in the sanction letter and loan agreement shall not suffice.

(7) Whenever reminders for non-compliance of material terms and conditions of loan are sent to borrowers, the applicable penal charges shall be communicated. Further, any instance of levy of penal charges and the reason therefor shall also be communicated.

(8) In the case of existing loans, the switchover to new penal charges regime shall be ensured on next review or renewal date, whichever is earlier.

C. Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans

258. A UCB shall put in place an appropriate policy framework meeting the following requirements for implementation and compliance:

(1) At the time of sanction, a UCB shall clearly communicate to the borrowers about the possible impact of change in benchmark interest rate on the loan leading to changes in EMI and / or tenor or both. Subsequently, any increase in the EMI / tenor or both on account of the above shall be communicated to the borrower immediately through appropriate channels.

(2) At the time of reset of interest rates, a UCB may, at its option, provide a choice to the borrowers to switch over to a fixed rate as per its Board approved policy. The policy, inter alia, may also specify the number of times a borrower will be allowed to switch during the tenor of the loan.

(3) The borrowers shall also be given the choice to opt for (i) enhancement in EMI or elongation of tenor or for a combination of both options; and, (ii) to prepay, either in part or in full, at any point during the tenor of the loan. Levy of foreclosure charges/ pre-payment penalty shall be subject to extant instructions.

Notes:

i. Whenever there is a reset of interest rates for an entire class of borrowers in a particular loan category, say home loan, due to increase in the reference benchmark; a UCB shall provide the following options to the borrowers:

(a) Either enhancement in EMI or elongation of number of EMIs, keeping the EMI unchanged or a combination of both options;

(b) Switch to fixed interest rate for the remaining portion of the loan, where such an option is provided by the bank; and

(c) To prepay, either in part or in full, at any point during the residual tenor of the loan.

ii. In case of housing loans, the option to elongate the tenor shall be subject to the regulations on maximum period of housing loans prescribed in the Chapter on ‘Housing Finance’ of the Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025.

(4) All applicable charges for switching of loans from floating to fixed rate and any other service charges / administrative costs incidental to the exercise of the above options shall be transparently disclosed in the sanction letter and also at the time of revision of such charges / costs by a UCB from time to time. The applicable charges shall be as approved by the Board and shall be displayed on the UCB’s website.

(5) A UCB shall ensure that the elongation of tenor in case of floating rate loan does not result in negative amortisation.

(6) A UCB shall share / make accessible to the borrowers, through appropriate channels, a statement at the end of each quarter which shall at the minimum, enumerate the principal and interest recovered till date, EMI amount, number of EMIs left and annualized rate of interest / APR for the entire tenor of the loan. The UCB shall ensure that the statements are simple and easily understood by the borrower.

259. Apart from the equated monthly instalment loans, these instructions would also apply, mutatis mutandis, to all equated instalment-based personal loans of different periodicities irrespective of whether they are linked to an external benchmark or an internal benchmark. In case of personal loans linked to an external benchmark, a UCB shall put in place adequate information systems to monitor transmission of changes in the benchmark rate to the lending rate.

D. Pre-payment charges on loans

260. In case of existing floating rate term loans sanctioned to individual borrowers on or before December 31, 2025, a UCB shall not charge pre-payment charges.

261. A UCB shall adhere to the following directions regarding levy of pre-payment charges on loans and advances sanctioned or renewed on or after January 1, 2026:

(1) For all floating rate loans granted for purposes other than business to individuals, with or without co-obligant(s), a UCB shall not levy pre-payment charges.

(2) For all floating rate loans granted for business purpose to individuals and Micro and Small Enterprises (as defined in Micro, Small and Medium Enterprises Development (MSMED) Act, 2006), with or without co-obligant(s):

(i) A Tier 4 UCB shall not levy prepayment charges on all floating rate loans / advances granted for business purpose to individuals and Micro and Small Enterprises (MSEs), with or without co-obligant(s).

(ii) A Tier 3 UCB shall not levy any pre-payment charges on all floating rate loans / advances granted for business purpose to individuals and MSEs, with or without co-obligant(s), with sanctioned amount/ limit up to Rs50 lakh.

(3) The Directions at paragraph 261(1) and (2) above shall be applicable irrespective of the source of funds used for pre-payment of loans, either in part or in full, and without any minimum lock-in period.

(4) Applicability of above Directions for dual / special rate (combination of fixed and floating rate) loans shall depend on whether the loan is on floating rate at the time of pre-payment.

(5) In cases other than those mentioned at paragraph 261(1) and (2) above, pre-payment charges, if any, shall be as per the approved policy of a UCB. However, in case of term loans, pre-payment charges, if levied by a UCB, shall be based on the amount being prepaid. In case of cash credit/ overdraft facilities, pre-payment charges on closure of the facility before the due date shall be levied on an amount not exceeding the sanctioned limit.

(6) In case of cash credit/ overdraft facilities, no pre-payment charges shall be applicable if the borrower intimates a UCB of his / her / its intention not to renew the facility before the period as stipulated in the loan agreement, provided that the facility gets closed on the due date.

(7) A UCB shall not levy any charges where pre-payment is effected at the instance of the bank.

(8) The applicability or otherwise of pre-payment charges shall be clearly disclosed in the sanction letter and loan agreement. Further, in case of loans and advances where KFS is to be provided as specified in paragraph 256 above, the same shall also be mentioned in the KFS. No pre-payment charges which have not been disclosed as specified herein shall be charged by a UCB.

(9) A UCB shall not levy any charges/ fees retrospectively at the time of pre-payment of loans, which were waived off earlier by the UCB.

E. Release of Movable / Immovable Property Documents on Repayment/ Settlement of Personal Loans

262. A UCB shall release all the original movable / immovable property documents and remove charges registered with any registry within a period of 30 days after full repayment/ settlement of the loan account.

263. The borrower shall be given the option of collecting the original movable / immovable property documents either from the banking outlet / branch where the loan account was serviced or any other office of a UCB where the documents are available, as per her / his preference.

264. The timeline and place of return of original movable / immovable property documents shall be mentioned in the loan sanction letters issued on or after December 1, 2023.

265. In order to address the contingent event of demise of the sole borrower or joint borrowers, a UCB shall have a well laid out procedure for return of original movable / immovable property documents to the legal heirs. Such procedure shall be displayed on the website of a UCB along with other similar policies and procedures for customer information.

E.1 Compensation for delay in release of Movable / Immovable Property Documents

266. A UCB shall communicate to the borrower reasons for delay in releasing of original movable / immovable property documents or failing to file charge satisfaction form with relevant registry beyond 30 days after full repayment / settlement of loan. In case where the delay is attributable to a UCB, it shall compensate the borrower at the rate of Rs5,000 for each day of delay.

267. In case of loss / damage to original movable / immovable property documents, either in part or in full, the bank shall assist the borrower in obtaining duplicate / certified copies of the movable / immovable property documents and shall bear the associated costs, in addition to paying compensation as indicated at paragraph 266 above. However, in such cases, an additional time of 30 days will be available to a UCB to complete this procedure and the delayed period penalty will be calculated thereafter (i.e., after a total period of 60 days).

268. The compensation provided under these directions shall be without prejudice to the rights of a borrower to get any other compensation as per any applicable law.

F. Release of other assets of the deceased borrowers to their legal heirs

269. A UCB shall not insist upon legal representation for release of other assets of deceased customers irrespective of the amount involved. The UCB may, however, call for succession certificates from legal heirs of deceased borrowers in cases where there are disputes and all legal heirs do not join in indemnifying the bank or in certain other exceptional cases where a bank has a reasonable doubt about the genuineness of the claimant/s being the only legal heir/s of the borrower.

G. Conduct related aspects in Lending Against Gold and Silver Collateral

270. The below instructions shall be complied with as expeditiously as possible but no later than April 1, 2026.

G.1 Policy aspects

271. The policy on lending against gold and silver collateral as required in terms of Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025 (hereinafter referred to as the ‘policy’ in this section) / SOPs prepared under the policy shall cover the conduct related aspects relating to:

(1) the assaying procedure of jewellery, ornaments or coins made of gold or silver (“eligible collateral” for this section);

(2) criteria / qualifications for employing gold and silver assayer or valuer;

(3) the auction procedure specifying, inter alia, the trigger event for the auction of eligible collateral and timeline for serving an auction notice upon the borrower;

(4) mode of auction;

(5) notice period allowed to the borrower(s) / legal heir(s) for settlement of loan before auction;

(6) empanelment of auctioneers;

(7) procedure to be followed in case of loss of eligible collateral pledged or any deterioration or discrepancy in quantity or purity of eligible collateral during internal audit or otherwise, including at the time of return or auction of the collateral, and fair compensation to be paid to the borrower(s) / legal heir(s) in such cases, with timelines for effecting the same, etc.

E.1 Standardisation of Procedure for Assaying and Valuation of Gold and Silver collateral

272. A UCB, which provides or intends to provide loans against eligible collateral shall ensure that a standardised procedure is put in place to assay the purity of gold and silver collateral, its weight (gross as well as net), etc. This procedure shall be adopted uniformly across all its branches for all assaying procedures, without any deviation.

273. A UCB shall display on its website the methodology adopted by it for determination of net weight of the gold and silver content of the eligible collateral and the price used to value the gold and silver content of the eligible collateral for determination of LTV ratio.

274. A UCB shall ensure presence of the borrower(s) while assaying the collateral at the time of sanctioning the loan. The deductions relating to stone weight, fastenings, etc., as part of the assaying procedure shall be explained to the borrower(s) and details incorporated in the certificate to be issued as per paragraph 278 below.

275. Post pledging, cases involving loss of gold or silver collateral and any deterioration or discrepancy in quantity or purity observed during internal audit or otherwise including at the time of return or auction of collateral shall be recorded and communicated promptly to the borrower(s) / legal heir(s). The process for making reimbursement or compensation as per the policy or SOP shall also be communicated to the borrower(s) / legal heir(s).

G.1 Standardisation of Documents and Communication

276. Documentation shall be standardised across all branches of a UCB.

277. The loan agreement shall cover the description of the eligible collateral taken as security, value of such collateral, details of auction procedure and the circumstances leading to the auction of the eligible collateral, the notice period which shall be allowed to the borrower for repayment or settlement of loan before the auction is conducted, timelines for release of pledged eligible collateral upon full repayment or settlement of loan, refund of surplus, if any, from the auction of the pledged eligible collateral and other necessary details. All applicable charges payable by the borrower, including those related to assaying, auction, etc., shall be clearly included in the loan agreement and KFS.

278. A UCB, while accepting the eligible collateral, shall prepare a certificate or e-certificate in duplicate on its letterhead regarding the assay of the collateral and state therein the purity (in terms of carats); gross weight of the eligible collateral pledged; net weight of gold or silver content therein and deductions, if any, relating to weight of stones, lac, alloy, strings, fastenings, etc.; damage, breakage or defects, if any, noticed in the collateral; image of the collateral; and the value of collateral arrived at the time of sanction One copy of the certificate or e-certificate shall be kept as part of the loan documents and the other copy be given to the borrower under their acknowledgement.

279. All communication with the borrower, especially, the terms and conditions of the loan, or other important communication which affects the interest of the borrower or the UCB, shall be in the language of the region or in a language as chosen by the borrower. For an illiterate borrower, important terms and conditions shall be explained in the presence of a witness, who shall not be an employee of the UCB.

G.2 Handling and Storage of Collateral

280. A UCB shall ensure that necessary infrastructure and facilities are put in place and appropriate security measures taken in each of its branches where loans are sanctioned against gold or silver collateral. It shall ensure that the gold and/ or silver collateral is handled only in its branches and only by its employees.

281. A UCB shall store the collateral only in its branches which are manned by its employees and having safe deposit vaults fit for storing gold and silver. Normally, such loans shall not be extended by branches that do not have appropriate secured facility for storage of the pledged eligible collateral.

282. The pledged eligible collateral may be transported from one branch to another branch, only as permitted under paragraph 291 below or in case of shifting or closure of branch(es) or exceptional reasons as per the process laid down by a UCB in terms of its policy.

283. A UCB shall periodically review the adequacy of systems for storage of the eligible collateral, conduct training of the concerned staff and carry out internal audit of all procedures to ensure that these are strictly adhered to.

284. As part of internal audit, a UCB shall carry out periodic surprise verification of the gold and silver collateral pledged with it and shall maintain a record thereof. A clause in the loan agreement shall be included for obtaining consent of the borrower(s) to carry out surprise verification including assay of the pledged eligible collateral even in their absence during the tenor of the loan. This aspect shall be specifically communicated to the borrower at the time of sanctioning the loan.

G.3 Release of Collateral after Repayment

285. A UCB shall release or return the pledged eligible collateral held as security to the borrower(s) / legal heir(s) on the same day but in any case, not exceeding a maximum period of seven working days upon full repayment or settlement of the loan.

286. At the time of release of pledged eligible collateral to the borrower(s) / legal heir(s), the collateral shall be verified for correctness as per details in the certificate to the borrowers’ satisfaction.

G.4 Transparency in Auction Procedure

287. A UCB shall give adequate notice to the borrower(s) / legal heir(s), as applicable, through available means of communication to repay or settle the loan dues prior to initiating the auction procedure. A copy of the notice and acknowledgement thereof shall be kept on record in both scenarios. In case the UCB is unable to locate the borrower(s) / legal heir(s) despite best efforts and even after issuance of a public notice, it may proceed with the auction, provided that a period of one month has lapsed from the date of the public notice.

288. A UCB shall implement a transparent auction procedure, which shall include, inter alia, announcement of the auction to the public by issue of advertisements in at least two newspapers, one in the regional language and another in a national daily.

289. The pledged eligible collateral shall be auctioned by the UCB only through its employee having necessary experience and / or training or an auctioneer empanelled by the UCB as per its policy. In cases where auctions are conducted by a UCB through their employees, necessary safeguards such as surprise visits by regional/ controlling officials on periodic basis, coverage under internal audit, etc., shall be put in place.

290. A UCB shall declare a reserve price for the gold and silver collateral at the time of auction, which shall not be less than 90 per cent of its current value.

Provided that in case auctions fail twice, a reserve price not less than 85 per cent of its current value shall be adopted.

291. The first auction shall be conducted physically in the same district in which the lending branch is located. However, in case of failure of first auction, a UCB may conduct the auction in an adjoining district or conduct online auction.

292. As a matter of policy, a UCB or its related parties shall not participate in the auctions to ensure that there is no potential conflict of interest.

293. After the auction, a UCB shall mandatorily provide full details of the value fetched at the auction and the dues adjusted to the borrower(s)/ legal heir(s). The surplus, if any, from the auction of the gold or silver collateral, shall be refunded to the borrower(s) / legal heir(s) within a maximum period of seven working days from the date of receipt of the full auction proceeds. A UCB may recover shortfall, if any, as per terms of the loan agreement.

G.5 Compensation

294. In case of any damage to the pledged eligible collateral by a UCB during the tenor of loan, the cost of repair shall be borne by the UCB.

295. In case of loss of the pledged eligible collateral and / or any loss emanating from deterioration or discrepancy in quantity or purity observed during internal audit or otherwise including at the time of return or auction of collateral, a UCB shall suitably compensate the borrower(s) / legal heir(s).

296. In case of delay in release of the pledged collateral after full repayment or settlement of loan by the borrower, where reasons for delay are attributable to a UCB, the UCB shall compensate the borrower(s) / legal heir(s) at the rate of Rs5,000 for each day of delay beyond the timeline prescribed at paragraph 285 above. If the delay is not attributable to the UCB, it shall communicate reasons for such delay to the borrower(s) / legal heir(s). Further, where the borrower(s) / legal heir(s) has not approached the UCB for release of pledged eligible collateral after full repayment or settlement of loan, the UCB shall issue periodic reminders to borrower(s) / legal heir(s) through letters, email or SMS if the email and mobile number are registered with the bank.

297. The compensation provided under these directions shall be without prejudice to the rights of a borrower to get any other compensation as per any applicable law.

G.6 Unclaimed Gold and Silver collateral

298. The pledged gold and / or silver collateral lying with a UCB beyond two years from the date of full repayment or settlement of loan shall be treated as unclaimed. The UCB shall periodically undertake special drives to ascertain the whereabouts of the borrower(s) / legal heir(s) in respect of such unclaimed gold and / or silver collateral.

299. A report on unclaimed gold / or silver collateral shall be put up to the Customer Service Committee or the Board, as the case may be, at half-yearly intervals for a review.

G.7 Other Instructions

300. A UCB shall refrain from issuance of misleading advertisements containing unrealistic claims to promote loans against gold or silver collateral.

301. A UCB shall ensure that all arrangements for sourcing and / or recovery of loans against eligible collateral, are in compliance with applicable instructions on outsourcing and recovery practices.

302. For prudential related aspects, the UCB shall be guided by the instructions contained in the Chapter on ‘Lending against Gold and Silver Collateral’ in Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025.

H. Conduct towards Microfinance borrowers

H.1 General

303. A Fair Practices Code (FPC) for microfinance loans based on these directions shall be put in place by a UCB with the approval of its Board. The FPC shall be displayed by a UCB in all its offices and on its website. The FPC should be issued in a language understood by the borrower.

304. There shall be a standard form of loan agreement for microfinance loans in a language understood by the borrower.

305. A UCB shall provide a loan card to the borrower which shall incorporate the following:

(1) Information which adequately identifies the borrower;

(2) Simplified factsheet on pricing;

(3) All other terms and conditions attached to the loan;

(4) Acknowledgements by a UCB of all repayments including instalments received and the final discharge; and

(5) Details of the grievance redressal system, including the name and contact number of the nodal officer of the bank.

306. All entries in the loan card shall be in a language understood by the borrower.

307. Issuance of non-credit products shall be with full consent of the borrowers and fee structure for such products shall be explicitly communicated to the borrower in the loan card itself.

H.2 Conduct aspects in Pricing of Microfinance Loans

308. There shall be no pre-payment charge levied on microfinance loans. Charges, if any, for delayed payment shall be applied on the overdue amount and not on the entire loan amount.

309. A UCB shall prominently display the minimum, maximum and average interest rates charged on microfinance loans in all its offices, in the literature (information booklets/ pamphlets) issued by it and details on its website. This information shall also be included in the supervisory returns and subjected to supervisory scrutiny.

310. Any change in interest rate or any other charge shall be informed to the borrower well in advance and these changes shall be effective only prospectively.

311. As part of their awareness campaigns, Self-Regulatory Organisations (SROs) / other industry associations may publish the range of interest rates on microfinance loans charged by their members operating in a district. SROs / other industry associations may also sensitize their members against charging of usurious interest rates.

312. RBI shall also make available information regarding interest charged by a UCB on microfinance loans.

H.3 Training of Staff

313. A UCB shall have a board-approved policy regarding the conduct of employees and system for their recruitment, training and monitoring. This policy shall, inter alia, lay down minimum qualifications for the staff and shall provide necessary training tools to deal with the customers. Training to employees shall include programs to inculcate appropriate behavior towards customers. Conduct of employees towards customers shall also be incorporated appropriately in their compensation matrix.

314. Field staff shall be trained to make necessary enquiries regarding the income and existing debt of the household.

315. Training, if any, offered to the borrowers shall be free of cost.

H.4 Guidelines related to Recovery of Microfinance Loans

316. A UCB shall put in place a mechanism for identification of the borrowers facing repayment related difficulties, engagement with such borrowers and providing them necessary guidance about the recourse available.

317. Recovery shall be made at a designated / central designated place decided mutually by the borrower and the UCB. However, field staff shall be allowed to make recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated / central designated place on two or more successive occasions.

318. A UCB or its agent shall not engage in any harsh methods towards recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:

(1) Use of threatening or abusive language

(2) Persistently calling the borrower and / or calling the borrower before 9:00 a.m. and after 6:00 p.m.

(3) Harassing relatives, friends, or co-workers of the borrower

(4) Publishing the name of borrowers

(5) Use or threat of use of violence or other similar means to harm the borrower or borrower’s family / assets / reputation

(6) Misleading the borrower about the extent of the debt or the consequences of non-repayment.

319. A UCB shall have a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism shall be provided to the borrower at the time of loan disbursal.

H.5 Engagement of Recovery Agents for recovery of Microfinance Loans

320. Recovery agents shall mean agencies engaged by a UCB for recovery of dues from its borrowers and the employees of these agencies.

321. A UCB shall have a due diligence process in place for engagement of recovery agents, which shall, inter alia, cover individuals involved in the recovery process. A UCB shall ensure that the recovery agents engaged by them carry out verification of the antecedents of its employees, which shall include police verification. A UCB shall also decide the periodicity at which re-verification of antecedents shall be resorted to.

322. To ensure due notice and appropriate authorisation, a UCB shall provide the details of recovery agents to the borrower while initiating the process of recovery. The agent shall also carry a copy of the notice and the authorisation letter from the UCB along with the identity card issued to him/her by the UCB or the agency. Further, where the recovery agency is changed by a UCB during the recovery process, in addition to the UCB notifying the borrower of the change, the new agent shall carry the notice and the authorisation letter along with his/her identity card.

323. The notice and the authorisation letter shall, among other details, also include the contact details of the recovery agency and the UCB.

324. The up-to-date details of the recovery agencies engaged by the UCB shall also be hosted on the UCB’s website.

I. Responsibilities of UCBs employing Recovery Agents

325. A UCB shall strictly ensure that it or its agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/ or anonymous calls, persistently calling the borrower and/ or calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, making false and misleading representations, etc. This direction is not applicable to microfinance loans.

Chapter IX – Miscellaneous Instructions

A. Greater Co-ordination between Banking System and Income - Tax Authorities

A.1 Co-ordination with Officers of Central Board of Direct Taxes

326. There is a need for greater co-ordination between the Income Tax Department and the banking system. As such, a UCB shall ensure that it extends necessary help / coordination to tax officials whenever required. Further, a UCB shall view with serious concern cases where its staff connives / assists in any manner with offences punishable under the Income Tax Act. In such cases, in addition to the normal criminal action, such staff member shall also be proceeded against departmentally.

Chapter X – Repeal and Other Provisions

A. Repeal and saving

327. With the issue of these Directions, the existing Directions, instructions, and guidelines relating to Responsible Business Conduct as applicable to Urban Co-operative Banks stand repealed, as communicated vide circular DOR.RRC.REC.302/33-01-010/2025-26 dated November 28, 2025. The Directions, instructions, and guidelines repealed prior to the issuance of these Directions shall continue to remain repealed.

328. Notwithstanding such repeal, any action taken or purported to have been taken, or initiated under the repealed Directions, instructions, or guidelines shall continue to be governed by the provisions thereof. All approvals or acknowledgments granted under these repealed lists shall be deemed as governed by these Directions. Further, the repeal of these directions, instructions, or guidelines shall not in any way prejudicially affect:

(1) any right, obligation or liability acquired, accrued, or incurred thereunder;

(2) any, penalty, forfeiture, or punishment incurred in respect of any contravention committed thereunder;

(3) any investigation, legal proceeding, or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid; and any such investigation, legal proceedings or remedy may be instituted, continued, or enforced and any such penalty, forfeiture or punishment may be imposed as if those directions, instructions, or guidelines had not been repealed.

B. Application of other laws not barred

329. The provisions of these Directions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations, or directions, for the time being in force.

C. Interpretations

330. For the purpose of giving effect to the provisions of these Directions or in order to remove any difficulties in the application or interpretation of the provisions of these Directions, the RBI may, if it considers necessary, issue necessary clarifications in respect of any matter covered herein and the interpretation of any provision of these Directions given by the RBI shall be final and binding.

(Veena Srivastava)
Chief General Manager