What changed
This master circular updates the previous July 2012 version, consolidating all guidelines up to June 30, 2013. It reiterates 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 includes the Madhava Das Committee recommendations and a detailed list of dos and don'ts for directors.
What it means for you
UCBs must ensure their boards meet the minimum professional qualification standards to enhance governance and risk management. Banks need to review their bye-laws to incorporate these requirements and ensure all RBI/Government circulars are reviewed by the full board. Non-compliance could lead to supervisory scrutiny, especially for banks lacking qualified directors.
What you must do
- Review board composition to ensure at least two directors have banking experience or professional qualifications in law, accountancy, or finance.
- Update bye-laws to include provisions for qualified directors, except for Salary Earners' Banks.
- Ensure all RBI/Government circulars are circulated to every board member and placed before the board for action.
- Adopt the dos and don'ts for directors as per the circular to guide board conduct.
Who it affects
Primary (Urban) Co-operative Banks, Salary Earners' Banks (exempt from professional qualification requirement), Board of Directors of UCBs, Chief Executive Officers of UCBs
What are the minimum qualifications required for directors on UCB boards?
At least two directors must have suitable banking experience at middle/senior management level or relevant professional qualifications in law, accountancy, or finance. This 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 (as individual or through a concern), and those convicted of criminal offences including moral turpitude are ineligible as per model by-law no.9 and state co-operative acts.
What is the role of the board in loan policies?
The board must ensure proper loan policies are adopted and followed, while day-to-day administration is left to the chief executive officer.