What changed
This master circular updates and consolidates all prior instructions on board of directors for urban co-operative banks issued up to June 30, 2011, replacing the July 1, 2010 circular. It reiterates the requirement for at least two professionally qualified or experienced directors, and clarifies ineligibility criteria for directors, including those engaged in money lending or convicted of criminal offenses.
What it means for you
Urban co-operative banks must review their board composition to ensure compliance with the updated eligibility and professionalism norms. The circular reinforces RBI's expectation that boards focus on policy formulation and oversight, leaving day-to-day operations to the CEO. Non-compliance could lead to supervisory action, especially regarding director qualifications and the prohibition of certain individuals.
What you must do
- Verify that your board has at least two directors with banking experience at middle/senior management or professional qualifications in law, accountancy, or finance.
- Ensure bye-laws include provisions for director eligibility, barring money lenders, financiers, and convicted persons from board membership.
- Review and align board policies with the Madhava Das Committee recommendations listed in Annexure 1.
- Confirm that the board's calendar of reviews and audit committee functions comply with the circular's guidelines.
- Update internal records to reflect the consolidated instructions and withdraw any outdated board-related policies.
Who it affects
Primary (Urban) Co-operative Banks, Board of Directors of Urban Co-operative Banks, Chief Executive Officers of Urban Co-operative Banks, State/Central Government registrars overseeing co-operative banks
What are the minimum qualifications required for directors on the board of an urban co-operative bank?
The board must have at least two directors with suitable banking experience at middle or senior management level, or relevant professional qualifications in law, accountancy, or finance. This requirement is waived for Salary Earners Banks due to their membership nature.
Who is ineligible to become a director of an urban co-operative bank?
Persons engaged in money lending, financing, or investment activities (as individuals or as proprietor/partner/employee/director of any concern), and those convicted of criminal offenses including moral turpitude, are ineligible as per model bye-law No. 9(b)(ii) and relevant Co-operative Societies Acts.
Does this circular introduce any new requirements compared to the previous master circular?
No new requirements are introduced; it consolidates all existing instructions up to June 30, 2011, replacing the July 1, 2010 circular. Banks should ensure continued compliance with the same norms, especially regarding director qualifications and board oversight.