RBI circular dated 31st December, 2019 for restructuring the Board of Management of Urban Co-operative Banks, imperative in view of the increasing risk of frauds taking place in these banks.
Reserve Bank of India had released draft guidelines on constituting BoM in UCBs on June 25, 2018 inviting comments from banks and other stakeholders. Taking into consideration the responses received, it has been decided to issue the guidelines on BoM as per Annex I.
2. UCBs shall constitute a BoM by making suitable amendments in their bye-laws. The BoM shall comprise of persons with special knowledge and practical experience in banking to facilitate professional management and focused attention to the banking related activities of the UCBs through appropriate amendments to their bye-laws, in accordance with the enclosed guidelines following the due process. While constituting the BoM, the Board of Directors (BoD) of UCB shall carry out a process of due diligence to determine the suitability of the person for appointment as the member of the BoM, based upon qualification, expertise, track record, integrity and other ‘fit and proper’ criteria as set out in Appendix I. Similar process of due diligence shall be carried out for determining the suitability of a candidate for appointment as CEO. For this purpose, banks shall obtain declaration-cum-undertaking from the proposed member of BoM/CEO in the format enclosed to the guidelines in Appendix II. The process of due diligence shall also be undertaken at the time of renewal of appointment.
3. UCBs with deposit size of ₹100 crore and above shall constitute BoM which will also be a mandatory requirement for allowing such banks to expand their area of operation and open new branches. UCBs with a deposit size less than ₹100 crore and Salary Earners’ Banks are exempted from constituting BoM. However, for having good governance practices, such banks may also constitute BoM, if they so desire.
4. Further, as per the guidelines, UCBs having deposit size of ₹100 crore and above shall obtain prior approval of Reserve Bank for appointment of CEO. In this connection, it is advised that Scheduled UCBs shall approach the Department of Regulation of Reserve Bank for approval at least three months prior to the end of tenure of the incumbent CEO. The banks shall submit the proposal for appointment of CEO along with the declaration-cum -undertaking of the CEO designate as per Appendix II of these guidelines along with the list of supporting documents as given in Annex II. Non-Scheduled UCBs shall approach the concerned Regional Office of the Department of Supervision for the requisite approval in the similar manner mentioned above. Reserve Bank reserves the right to seek additional information/documents, if deemed necessary.
5. A copy of the amended bye-laws providing for constitution of BoM shall be forwarded to the concerned Regional Office of the Department of Supervision for information and record along with details of the members of BoM immediately after constitution of BoM. UCBs shall also be required to submit an annual return furnishing details of the members of the BoM as per the format given in Annex III as on December 31 each year, within 15 days of the end of the period to the respective Regional Offices of the Reserve Bank of India.