What changed
Earlier, UCBs could donate up to 1% of previous year's published profits to trusts, including those involving directors. Now, any donation to a trust where a director or relative holds a position or is interested is completely prohibited, regardless of the profit ceiling.
What it means for you
UCBs must immediately stop all donations to trusts where directors or their relatives are trustees, beneficiaries, or involved in any capacity. This tightens conflict-of-interest rules and ensures bank funds are not used for personal benefit. Banks need to review their donation policies and identify any such trusts to avoid non-compliance.
What you must do
- Immediately cease all donations to trusts where directors or their relatives hold positions or are interested.
- Review existing donation commitments and identify any trusts falling under the prohibited category.
- Update internal policies and board-approved donation guidelines to reflect this absolute prohibition.
- Ensure compliance teams verify the status of all recipient trusts before any future donations.
Who it affects
All Primary (Urban) Co-operative Banks, Board of Directors of UCBs, Compliance and audit teams of UCBs
Does this ban apply even if the donation is within the 1% profit ceiling?
Yes, the circular explicitly states that donations to director-linked trusts are prohibited even within the permissible ceiling of 1% of published profits.
What is considered 'interest' in a trust under this circular?
A director or relative is considered to have an interest if they hold a position as trustee, are beneficiaries, or are involved in any capacity that could influence their independence.
Who qualifies as a 'relative' of a director?
Relatives include spouse, parents, children, siblings, and their spouses, as well as members of a Hindu Undivided Family, as defined in the circular's annex.