The rules behind pigmy collection: RBI, states and who regulates what

An agent collecting cash at your door is a regulated banking activity, not an informal arrangement. But which rules apply depends entirely on what kind of institution appointed that agent, and most people, including many depositors, do not know which one they are dealing with.

This guide sets out who regulates what, what the rules require, and the one change from December 2025 that decides whether an urban co-operative bank may use agents for daily collection at all.

Three institutions, three regulators

Pigmy deposits are offered by bodies with very different legal characters. They look identical at the doorstep and are not remotely identical on paper.

The practical consequence is that RBI's rules on doorstep banking, discussed below, bind co-operative banks. They do not bind a credit society or a patpedhi, which answers to its Registrar instead.

What the 2020 amendment changed

The Banking Regulation (Amendment) Act 2020 brought urban and multi-state co-operative banks properly under RBI's supervisory powers, covering management, audit, capital and reconstruction, and requiring RBI approval for chief executive appointments. It did not bring co-operative societies under RBI. That distinction is the one that matters throughout this guide.

The doorstep banking rules, in plain terms

RBI's Branch Authorisation Directions of 4 December 2025 devote a chapter and an annex to doorstep banking, and pigmy collection sits squarely inside it: the first permitted service listed is "pick up of cash against receipt".

A co-operative bank offering it does so voluntarily and needs no prior RBI approval, but it must have a scheme approved by its own Board, and must tell RBI within 15 calendar days of starting one. The Board must review the scheme annually.

The parts that matter to you as a depositor are specific and enforceable:

• You must get a receipt. Cash collected has to be acknowledged with a receipt issued on behalf of the bank.
• Your money must be credited fast. Cash collected must reach your account the same day or the next working day, depending on when it was collected.
• You must be told when. At the time of collection you have to be given an advice stating the date of credit.
• Charges must be public. Any charge for doorstep service must sit in the Board-approved policy, form part of your agreement, and be prominently shown on the bank's website and brochures.
• There are cash limits. The bank must set limits on how much its employees or agents may collect and deliver.
• KYC still applies. Customer identification follows RBI's 2025 KYC Directions for urban co-operative banks.

There is also a limit on what you can demand. The rules state plainly that the agreement gives you no right to claim the service at your doorstep, and that the bank's liability is the same as if you had transacted at the branch. Doorstep banking is an extension of the branch, not a separate promise.

The change most people have missed

Since December 2025, whether a co-operative bank may use a commission agent at all depends on its size.

The Directions say it directly at clause 74: "Tier 3 and 4 UCBs may offer doorstep banking services to customers either directly through its own employees or through agents." It then provides that "Tier 1 and 2 UCBs shall offer doorstep banking services only through their permanent employees." The annex repeats it as a mode-of-delivery restriction: agents are "permitted only for Tier 3 and 4 UCBs".

RBI's tiers are set by deposit size:

Read together, the rule is that a co-operative bank with deposits under ₹1,000 crore may run doorstep collection only with permanent employees on its payroll. The commission agent, who has been the entire delivery mechanism of pigmy collection since 1928, is not available to it.

How large a change that is depends on how many banks sit below the ₹1,000 crore line, a count this guide does not give because we have not verified a current figure. It does not touch credit societies or patpedhis, which RBI does not regulate as banks, and which are the institutions Maharashtra's reported agent figures concern.

We want to be careful about how far we push this reading. The Directions govern doorstep banking services as they define them, and pigmy schemes at many banks long predate this framework. Whether a bank treats a legacy pigmy scheme as the doorstep banking service described in Chapter V, or as something else, is a question for that bank and its supervisors, and we have not found published guidance settling it. What is not in doubt is the text of clause 74 and what it says about agents.

Commission is capped by states, not by RBI

RBI's rules require an agent-selection and fee policy approved by the bank's Board; they set no national commission rate.

The caps are a state matter, and only for the institutions the state regulates. Maharashtra's Cooperation Department capped pigmy agent commission at 2.5% for credit co-operatives with effect from 1 April 2026. After agents and their federations objected, the Cooperation Commissioner raised the cap to 3% in June 2026. Those orders reach roughly two lakh agents serving about one crore families across some 16,000 credit co-operatives in that state.

Whether your money is insured

This is decided by the institution's legal character, not by how the product looks.

Deposit insurance from the DICGC covers all state, central and primary co-operative banks, which includes urban co-operative banks, up to ₹5,00,000 per depositor per bank, principal and interest together. The DICGC also states, in terms, that "Primary cooperative societies are not insured by the DICGC."

So the same daily deposit is insured at a licensed co-operative bank and uninsured at a credit society, a patpedhi or a Nidhi company. Given that agents handle cash before any branch sees it, this is the single most consequential thing to establish about your own account.

Multi-state societies

The Multi-State Co-operative Societies (Amendment) Act 2023 tightened governance for societies operating across state lines, creating a Co-operative Election Authority, a Co-operative Ombudsman with a three-month grievance timeline, and a fund for rehabilitating sick societies, alongside restrictions on share redemption and loans against a society's own shares. It is a governance statute rather than a rulebook for doorstep collection, but it is the frame a multi-state society's members complain within.

What this means in practice

If you are a depositor, establish two things: whether your institution is a bank or a society, and therefore whether you are insured; and whether you are getting the receipt, the same-day or next-day credit, and the advice of the credit date that a bank's doorstep scheme is required to give you.

If you run an institution, the tier question is the one to answer first, then the Board-approved scheme, the notification to RBI within 15 days, the agent-selection and fee policy, published charges, cash limits, and the annual Board review.

What we could not establish

• Whether supervisors treat legacy pigmy schemes as Chapter V doorstep banking. The clause is unambiguous about agents; its application to schemes that predate the framework is not something we found addressed in published guidance.
• How many urban co-operative banks sit in each tier, and therefore how many are affected. We found no current published tier-wise count.
• What state Registrars require of collection agents outside Maharashtra. Commission caps are reported for Maharashtra; we did not find comparable published orders for other states.
• Whether the RBI document we read is the latest version. We read the Directions dated 4 December 2025, circular RBI/DOR/2025-26/271, from a mirror rather than from rbi.org.in. Check the RBI website for any later amendment before relying on it.