What changed
This master circular updates the previous July 2011 circular, consolidating all instructions on board of directors for urban co-operative banks up to June 30, 2012. It reiterates the need for at least two directors with banking experience or professional qualifications, and emphasizes board oversight over loan policies and compliance.
What it means for you
UCBs must ensure their boards have the required professional expertise and follow strict governance norms. The circular reinforces RBI's expectation that boards focus on policy and supervision, leaving day-to-day operations to the CEO. Non-compliance could invite regulatory scrutiny.
What you must do
- Review board composition to ensure at least two directors have banking experience or relevant professional qualifications.
- Update bye-laws to include provisions for professional directors, except for Salary Earners Banks.
- Ensure all RBI and government circulars are circulated to every board member and placed before the board for action.
- Adopt and enforce proper loan policies as directed by the board.
Who it affects
Primary (Urban) Co-operative Banks, Board of Directors of UCBs, Chief Executive Officers of UCBs
What is the minimum professional qualification required for directors?
Banks must have at least two directors with suitable banking experience at middle/senior management level or professional qualifications in law, accountancy, or finance.
Are Salary Earners Banks exempt from the professional director requirement?
Yes, the instruction for at least two professional directors is not insisted upon for Salary Earners Banks due to their membership nature.
What are the key responsibilities of the board under this circular?
The board must formulate policies, exercise overall supervision, ensure proper loan policies, and review all RBI/government circulars. Day-to-day administration is left to the CEO.