Money & Banking

RBI directs UCBs having deposits above ₹100 cr to set up Board of Management

Our Bureau Mumbai | Updated on December 31, 2019 Published on December 31, 2019

To facilitate professional management and focussed attention to their banking-related activities, the Reserve Bank of India (RBI), on Tuesday, directed Urban Co-operative Banks (UCBs) with deposit size of ₹100 crore and above to constitute a Board of Management (BoM).

In its guidelines on constituting BoM in UCBs (other than Salary Earners’ Banks), the central bank said it will be mandatory for such banks to constitute BoM for seeking approval to expand their area of operation and/or open new branches. These UCBs will also require prior approval of the RBI for appointment of their CEOs.

UCBs with a deposit size less than ₹100 crore and Salary Earners’ Banks, however, are exempted from constituting BoM, although they are encouraged to do so voluntarily. The BoM will have minimum five members and maximum 12. The CEO would be a non-voting member. A member of BoM can be appointed in more than one bank, subject to a maximum of three, provided that there is no overlapping in area of operation. The members of BoM should at all times satisfy the ‘Fit and Proper’ criteria.

As per the guidelines, the RBI has the powers to remove any member of BoM and/ or the CEO if the person is found to be not meeting the criteria prescribed by it or acting in a manner detrimental to the interests of the bank or its depositors or both. The RBI also has powers to supersede the BoM if the functioning of BoM is found unsatisfactory.

To report to BoD

The BoM will report to the Board of Directors (BoD) and exercise oversight over the banking-related functions of the UCBs, assist the BoD on formulation of policies, and any other related matter specifically delegated to it by the BoD.

The functions of the BoM will include rendering expert advice on proposals being put up to the board or any committee of the board for sanction of loans; recommending action for recovery of bad loans, one-time settlement or compromise settlement and assisting the board in monitoring the same; overseeing the management of funds and borrowings; and recommending proposals for investment of bank’s funds as per the board approved policy.

The BoM will also have oversight on internal controls and systems and risk management; exercise oversight on implementation of computerisation, technology adoption and other incidental issues; oversee internal audit and inspection functions, including compliance; exercise oversight on complaint redressal system; and assist the board in formulation of policies related to banking.

All members of the BoM will consist of persons having special knowledge or practical experience in respect of one or more areas, such as accountancy, agriculture and rural economy, banking, co-operation, economics, finance, law, small scale industry, and IT.

Published on December 31, 2019
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