What changed
Earlier, all UCBs were required to ensure at least two directors with banking experience or professional qualifications on their boards. Now, Salary Earners Banks are exempt from this requirement, as RBI reviewed the rule considering their membership nature.
What it means for you
Salary Earners UCBs no longer need to recruit or maintain two professional directors, reducing compliance burden and board restructuring costs. This recognizes that their member-depositor base may not necessitate such expertise, but banks must still ensure sound governance.
What you must do
- Review your board composition to confirm you qualify as a Salary Earners Bank under RBI's definition.
- Document the exemption in board minutes and update your governance policy accordingly.
- Continue to ensure overall board effectiveness and compliance with other governance norms.
- Monitor any future RBI circulars that may revise this exemption.
Who it affects
Salary Earners Primary (Urban) Co-operative Banks, Boards of Directors of Salary Earners UCBs, Compliance officers of UCBs
What exactly is a Salary Earners Bank?
The circular does not define the term, but it refers to UCBs whose membership is primarily composed of salary earners, as classified by RBI.
Does this mean Salary Earners UCBs can have zero professional directors?
Yes, RBI has decided not to insist on induction of two professional directors for these banks, so they are not required to have any.
Is this exemption permanent?
The circular does not specify a time limit, but RBI may review policies in the future. Banks should stay updated on any changes.