Supreme Court Upholds RBI’s Power to Supersede Multi-State Co-operative Bank Boards
The Supreme Court has ruled that the Reserve Bank of India’s power to supersede the Board of Directors of a multi-State co-operative bank under Section 36AAA of the Banking Regulation Act, 1949 is not restricted by the six-month limit prescribed under Article 243ZL of the Constitution.
Case Background
The appeals were filed by former directors of Abhyudaya Co-operative Bank Limited challenging RBI’s orders superseding the Bank’s Board and appointing an Administrator. The RBI had superseded the Board in November 2023 and subsequently extended the supersession.
The Bombay High Court had upheld the RBI’s action. The former directors approached the Supreme Court.
Key Findings of the Supreme Court
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The third proviso to Article 243ZL specifically makes the Banking Regulation Act applicable to co-operative societies carrying on the business of banking.
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RBI can supersede the Board of a multi-State co-operative bank for a period not exceeding five years in aggregate.
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An order of supersession can be extended even after the original term of the elected Board has expired.
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The requirement of consultation with the State Government under Section 36AAA applies only to uni-State co-operative banks and not to multi-State co-operative banks.
The Court observed that banking involves public interest and protection of depositors, and therefore the specialised regulatory powers of the RBI under the Banking Regulation Act must be preserved.
Outcome
The Supreme Court dismissed the appeals and upheld the judgment of the Bombay High Court. No costs were imposed.
Source: Supreme Court of India judgment dated 3 September 2026 in Civil Appeal Nos. 5351–5352 of 2025 (2026 INSC 955).