What changed
RBI has made it mandatory for UCBs with assets of ₹5,000 crore or more to appoint a Chief Risk Officer. The CRO must have a fixed tenure, board-approved appointment, and cannot hold dual roles like CEO or CFO. The CRO reports directly to MD/CEO or board, with quarterly board meetings without MD/CEO if reporting to them.
What it means for you
Large UCBs must now strengthen risk governance by appointing a dedicated CRO, ensuring independence from business functions. This enhances risk oversight but increases compliance costs. Banks need to review their risk management frameworks and board committees to meet the March 2022 deadline.
What you must do
- Identify if your UCB's asset size as on March 31, 2021, is ₹5,000 crore or above; if so, appoint a CRO by March 31, 2022.
- Ensure the CRO has a fixed tenure, board approval, and no dual responsibilities like CEO, COO, CFO, or internal audit.
- Set up a Risk Management Committee of the Board by March 31, 2022, if applicable.
- Place this circular before the board at the next meeting for compliance.
- For UCBs crossing the threshold later, appoint a CRO within six months of the financial year-end.
Who it affects
Primary Urban Co-operative Banks with asset size of ₹5,000 crore or more, Boards of Directors of these UCBs, Risk management teams and senior management
What is the deadline for appointing a CRO?
UCBs meeting the ₹5,000 crore asset threshold as on March 31, 2021, must appoint a CRO by March 31, 2022. Those crossing the threshold later have six months from the end of the financial year.
Can the CRO also hold other roles like CEO or CFO?
No, dual hatting is prohibited. The CRO cannot have any other responsibility such as CEO, COO, CFO, or Chief of Internal Audit, ensuring independence from business verticals.
What happens if the CRO is removed before tenure ends?
Premature transfer or removal requires board approval and must be reported to the concerned Regional Office of RBI's Department of Supervision.