What changed
RBI issued a master circular consolidating all instructions on Board of Directors for UCBs up to June 30, 2009, replacing the previous circular from July 1, 2008. The circular reaffirms the requirement for at least two directors with banking experience or professional qualifications in law, accountancy, or finance, except for Salary Earners Banks. It also reiterates that persons engaged in money lending or convicted of criminal offences are ineligible to be directors.
What it means for you
UCBs must ensure their boards have at least two professionally qualified or experienced directors, which may require amending bye-laws. Banks need to verify that no director is involved in money lending or has a criminal record. The circular emphasizes the board's role in policy formulation and oversight, not day-to-day management.
What you must do
- Review board composition to ensure at least two directors have banking experience or professional qualifications in law, accountancy, or finance.
- Amend bye-laws if needed to mandate professional qualifications for directors.
- Verify that no director is engaged in money lending, financing, or investment activities, or has been convicted of criminal offences.
- Ensure all RBI and government circulars are circulated to every board member and placed before the board for action.
- Adopt proper loan policies and maintain board oversight, leaving daily operations to the CEO.
Who it affects
Primary Urban Co-operative Banks, Board of Directors of UCBs, Chief Executive Officers of UCBs, State/Central Government registrars of co-operative societies
What are the minimum professional qualifications required for directors in UCBs?
At least two directors must have suitable banking experience at middle/senior management level or relevant professional qualifications in law, accountancy, or finance. This requirement does not apply to Salary Earners Banks.
Who is ineligible to become a director of a UCB?
Persons engaged in money lending, financing, or investment activities (individually or as proprietor/partner/employee/director of any concern) and those convicted of criminal offences including moral turpitude are ineligible as per model by-law no. 9 and co-operative societies acts.
What is the primary role of the Board of Directors in a UCB?
The board is responsible for formulating policies in line with RBI and government guidelines, and exercising overall supervision and control. Day-to-day administration should be left to the chief executive officer.