RBI Grants Scheduled Status to Coastal Local Area Bank Limited via Second Schedule Inclusion

The Reserve Bank of India has formally inducted Coastal Local Area Bank Limited into the Second Schedule of the Reserve Bank of India Act, 1934, elevating the lender's regulatory status within the Indian banking system. The inclusion was notified through a central bank directive issued under specific statutory powers, marking a formal transition in the bank's standing with the regulator.

Background

The Reserve Bank of India Act, 1934 serves as the primary legislative framework governing central banking functions and the regulation of banking entities in India. Under Section 42 of this Act, the Reserve Bank maintains a Second Schedule which lists banks that meet specific criteria defined by the regulator. The Reserve Bank of India issued Notification F. No. DoR.LIC.No.S3539/22-03-070/2026-27 on July 28, 2026, to update this schedule. The notification was subsequently published in the Gazette of India on August 11, 2026, under the authority of the Executive Director.

Key Provisions

The notification focused on a singular, substantive amendment to the regulatory list maintained by the central bank.

Coastal Local Area Bank Inducted into Second Schedule

The Reserve Bank of India, through this notification, directed the inclusion of Coastal Local Area Bank Limited in the Second Schedule to the Reserve Bank of India Act, 1934. This action was taken specifically in pursuance of the powers conferred by clause (a) of sub-section (6) of Section 42 of the Act.

Formal Notification and Authorization

The directive was signed and issued by R. Lakshmi Kanth Rao, Executive Director of the Reserve Bank of India, from the Central Office in Mumbai. The notification was officially categorized under Part III, Section 4 of the Gazette of India.

Stakeholders Impacted

The primary stakeholder impacted by this notification is Coastal Local Area Bank Limited. Additionally, the move affects the bank's existing and prospective customers, interbank market participants, and the Reserve Bank of India’s supervisory departments. The inclusion signifies the bank's formal recognition as a "Scheduled Bank," a status that impacts its operational relationship with the central bank and other financial institutions.

Practical/Compliance Impact

The inclusion of an entity in the Second Schedule to the Reserve Bank of India Act, 1934 results in an immediate shift in the lender's regulatory profile.

Transition to Scheduled Bank Status

Coastal Local Area Bank Limited will now be recognized as a Scheduled Bank. This status is typically a prerequisite for banks to participate in certain government business and clearinghouse operations, although specific operational permissions are subject to separate RBI guidelines.

Statutory Reporting and Compliance

Following this inclusion, the bank is required to align its reporting and reserve maintenance with the provisions applicable to scheduled banks under Section 42 of the Act. This includes adherence to specific cash reserve requirements and periodic returns as mandated for scheduled entities.

Effective Date

The notification was issued by the Reserve Bank of India on July 28, 2026. It was subsequently published in the Extraordinary Gazette of India on Tuesday, August 11, 2026. The directive for inclusion in the Second Schedule was effective as of the date of the notification's issuance.