Cooperative banks will need RBI approval for CEO appointment

In order to strengthen its supervisory control over the Urban Co-operative Banks (UCBs) the RBI said that UCBs with deposit base over Rs 100 crore will requir prior approval of RBI for appointment of their CEOs.

After capping lending to a single borrower and raising the priority sector lending requirements for UCBs, the RBI in its final guidelines on constitution of Board of management in UCBs, said that UCBs with deposit size of Rs 100 crore and above, will also require prior approval of RBI for appointment of their CEOs. The central bank’s announcement is significant considering its supervision practices came in for criticism after a gross violation of lending norms by a better run UCB-PMC Bank as a result of which the bank is under an RBI appointed administrator with depositors also facing withdrawal restrictions.

The announcement is a part of the final guidelines on the constitution of the Board of Management (BoM), as announced in statement on developmental and regulatory policies on December 05, 2018, which was released. RBI has also decided to implement the suggestion of putting in place Board of Management in addition to the Board of directors (BoD) in UCBs with deposit size of Rs 100 crore and above. These guidelines is however not applicable to Salary Earner’s Bank. It would be mandatory for the larger UCBs to constitute BoM for seeking approval to expand their area of operation and/or open new branches.