For decades, India's rural banking system — RRBs, State Co-operative Banks, District Central Co-operative Banks — was supervised by NABARD, not the RBI. NABARD inspected the books, NABARD assessed financial health, NABARD recommended branch licensing, NABARD channelled refinance. The RBI set prudential norms but relied on NABARD to enforce them on the ground.
That arrangement is ending. The November 2025 consolidation, the Banking Regulation (Amendment) Act 2020, and a series of circulars over the past five years have progressively shifted supervisory authority from NABARD to the RBI — or more precisely, from the RBI's Rural Planning and Credit Department (RPCD) working through NABARD, to the RBI's Department of Regulation (DOR) working directly.
This shift runs through all five regulatory topics covered in this series. Here's how.
The Old Architecture
How It Worked Before 2020
For RRBs:
- KYC circulars came through RPCD, referencing NABARD circulars (RBI/2004-05/369, February 2005): "Please refer to NABARD's circulars NB.DOS.HO.POL.333/J.1-2002/03 dated April 30, 2003."
- Branch licensing went through NABARD to RBI (RRB Branch Licensing Liberalisation RBI/2005-06/409 (since withdrawn)): "RRBs are required to submit their applications to the Reserve Bank through NABARD."
- Inspections conducted by NABARD under Section 35(6) of the Banking Regulation Act
- Refinance flowed from NABARD to RRBs and co-operative banks
- Annual Credit Plans based on NABARD's Potential Linked Plans (NABARD Potential Linked Plans RBI/2013-14/520)
For State/District Co-operative Banks:
- NABARD as primary supervisor under NABARD Act, 1981
- RBI set norms (through RPCD department circulars); NABARD enforced them
- The CFT chain for StCBs/DCCBs (UAPA Section 51A for StCBs/DCCBs RBI/2009-10/198, 100+ downstream refs) came through the RPCD department, not DBOD
For UCBs:
- Dual regulation between RBI (banking) and Registrar of Co-operative Societies (corporate)
- RBI's Urban Banks Department (UBD) supervised banking operations
- The state Registrar regulated governance — a gap the PMC crisis exposed
The Department Structure
| Department | Entities Supervised | Role |
|---|---|---|
| DBOD (Banking Operations & Development) | Commercial banks | Direct supervision |
| RPCD (Rural Planning & Credit) | RRBs, StCBs, DCCBs | Through NABARD |
| UBD (Urban Banks) | UCBs | Direct, but dual-controlled with Registrar |
| FIDD (Financial Inclusion & Development) | Financial literacy, PSL monitoring | Policy |
The Trigger Events
1. The PMC Bank Crisis (September 2019)
The PMC failure exposed the cost of dual regulation. The RBI couldn't supersede the board. The Registrar didn't understand banking. Rs 6,500 crore in fraud persisted for a decade.
2. The Banking Regulation (Amendment) Act, 2020
Parliament's response gave the RBI direct powers over co-operative banks — board supersession, resolution, capital regulation. This applied to UCBs immediately and to multi-state co-operative banks.
3. The November 2025 Consolidation
The creation of the Department of Regulation (DOR) as the single supervisory authority for all regulated entities, and the issuance of entity-specific Master Directions directly from DOR — not routed through RPCD or NABARD — completed the structural shift.
The New Architecture
What Changed
Before November 2025:
RBI (RPCD) → NABARD → RRBs / StCBs / DCCBs
RBI (UBD) → UCBs (dual control with Registrar)
RBI (DBOD) → Commercial Banks
After November 2025:
RBI (DOR) → All entity types directly
├── Commercial Banks (13 entity-specific directions)
├── Small Finance Banks (entity-specific directions)
├── UCBs (7 entity-specific directions)
├── RRBs (3 entity-specific directions)
├── Rural Co-operative Banks (entity-specific directions)
├── NBFCs (entity-specific directions)
└── Others (Payment Banks, Local Area Banks, AIFIs, HFCs)
NABARD retains a role in refinance, Potential Linked Plans, and financial inclusion — but the regulatory directions now come from DOR directly.
Evidence in the Circulars
RRB KYC — old channel (2005):
Department reference: RPCD.NO.RRB.BC.81/03.05.33(E)/2004-05
Source department: RPCD (Rural Planning & Credit)
Routing: Through NABARD circulars
RRB KYC — new channel (2025):
Department reference: DOR.AML.REC.No.185/14.01.004/2025-26
Source department: DOR (Department of Regulation)
Routing: Direct from RBI to RRBs
Co-operative bank credit — old channel (2009):
Department reference: UBD.PCB.No.59/13.05.000/2008-09
Source department: UBD (Urban Banks Department)
Co-operative bank credit — new channel (2025):
Department reference: DOR.CRE.REC.196/07-01-005/2025-26
Source department: DOR
The shift from RPCD/UBD department codes to DOR codes in the circular references is the clearest marker of the supervision transfer.
What NABARD Still Does
The RRB Credit Facilities Directions 2025 (Reserve Bank of India (Regional Rural Banks – Cred) still reference NABARD for specific functions:
- Prior authorisation for certain co-operative lending activities
- Potential Linked Plans for district-level credit planning
- Refinance operations for agricultural and rural development
- Training support for RRB staff in money market operations (RRB Repositioning Package RBI/2005-06/243 (since withdrawn): "The Reserve Bank and NABARD will help in organising training programmes.")
The Lead Bank Scheme Master Circulars — issued annually through April 2025 — continue to coordinate NABARD's PLPs with bank lending through the SLBC/DLCC/BLBC structure. These Master Circulars (MC_12277, MC_12478, MC_12643, MC_12808) appear in all five topic extracts because they touch credit planning (PSL), rural banking (RRB, COOP), KYC (account opening for financial inclusion), and occasionally FEMA (forex in rural areas).
The PSL Reporting Connection
The supervision shift has a direct impact on PSL monitoring. Under the old system, NABARD monitored agricultural credit targets for RRBs and co-operative banks. Under the new system, the RBI's FIDD department monitors PSL targets for all entity types, using standardised Priority Sector Lending Certificates (PSLCs) as a market mechanism.
The SHG-Bank Linkage Master Circulars and DAY-NRLM Master Circulars — issued annually — still reference NABARD's role in SHG promotion and capacity building. The microfinance reporting formats (Microfinance Reporting Formats (Microfinance - Submission of progress reports), 24 downstream refs) still route progress reports to NABARD's Micro Credit Innovations Department.
What It Means for Compliance
A rural bank compliance officer in 2024 tracked circulars from three departments (RPCD, UBD, FIDD) plus NABARD instructions plus state Registrar directions. In 2026, the same officer tracks entity-specific directions from DOR plus residual NABARD refinance and PLP instructions.
The number of regulatory sources has shrunk. The clarity has increased. But the fundamental challenge remains: the regulations written in Mumbai must be implemented in a bank branch in Vidarbha, by staff who were recruited locally, managing a portfolio where the largest borrower is a 5-acre cotton farmer whose income depends on the monsoon.
The RBI set up High Level Committees in 1997 specifically to improve agricultural credit delivery and simplify procedures — the beginning of the institutional attention that would eventually lead to supervision being pulled from NABARD to the RBI: RBI sets up High Level Committees to improve Delivery Systems for Agricultural Credit and SSIs (PR_18696).
Last updated: April 2026