RBI Update - Reserve Bank of India (Rural Co-operative Banks – Undertaking of Financial Services) Second Amendment Directions, 2026

The Reserve Bank of India (Rural Co-operative Banks – Undertaking of Financial Services) Second Amendment Directions, 2026, effective January 1, 2027, revise the framework governing agency and referral arrangements of Rural Co-operative Banks (RCBs) by redefining Agency Business and Referral Services, introducing definitions for Regulated Financial Products and Services, Third-Party Products and Services (TPPS) and Third-Party Product and Service Providers (TPPSP), and consolidating all customer service and conduct-related requirements under the RBI (Rural Co-operative Banks – Responsible Business Conduct) Directions, 2025. The amendments remove certain existing provisions relating to insurance distribution and referral arrangements, mandate compliance with the Responsible Business Conduct Directions and applicable IRDAI regulations, require all permitted financial services activities to be undertaken strictly on a fee-based and no-risk participation basis with upfront customer disclosures, ensure that partner insurance companies maintain robust grievance redressal mechanisms, and permit display only of authorised insurance products on the bank’s websites and digital channels. The Directions are aimed at strengthening customer protection, transparency, governance and accountability in the distribution and referral of third-party financial products by RCBs.