RBI proposes Board of Management in Urban Co-operative banks

The RBI proposed that all Urban Co-operative Banks (UCBs) having deposits of over Rs 100 crore will have to set up a Board of Management within one year to promote professional management in the banks.

BoM will be in addition to the Board of Directors (BoD), said the RBI's draft guidelines on which it has invited public comments by July 24.

An expert committee on licensing of new Urban Cooperative Banks (2010) set up under the chairmanship of Y.H Malegam had recommended, inter alia, that a BoM in every UCB, in addition to the BoD, which was reiterated by the High Powered Committee on Urban Cooperative Banks (Chairman R. Gandhi) constituted in January 2015.

After considering the feedback of the stakeholders, it has been decided to implement the suggestion of the Malegam Committee on putting in place a BoM in addition to BoD in UCBs, the RBI said.

Currently, the BoD of a UCB perform both the executive and supervisory roles and has the responsibility to oversee the functioning of UCB as a co-operative society as well as its functions as a bank.

Since UCBs are accepting public deposits, it is imperative that a separate mechanism be put in place to protect the interests of depositors, the RBI said while proposing to implement a BoM consisting of members with special knowledge and practical experience in banking to facilitate professional management and focussed attention to banking related activities of UCBs.

"There shall be a BoM in every UCB in addition to the Board of Directors. BoM shall be constituted by the Board of Directors (BoD). Existing UCBs having deposit size exceeding Rs 100 crore shall put in place the BoM within a period of one year. Other banks may constitute the BoM within a period of two years," the draft said.

The proposed BoM will have a minimum of three members in UCBs having deposit size up to Rs 100 crore and five members in UCBs having deposit size above Rs 100 crore.

The maximum number of members in BoM should not exceed 12.

(Agencies)