What changed
RBI issued comprehensive directions under the Banking Regulation Act for MD/WTD appointments in UCBs, replacing earlier piecemeal guidelines. UCBs with deposits less than ₹100 crore and Salary Earners' Banks are exempt from seeking prior RBI approval but must have a board-approved policy and report appointments. All UCBs must review the fit-and-proper status of existing MD/WTD within two months and obtain a deed of covenants.
What it means for you
UCBs now have a clear, unified framework for MD/WTD appointments, reducing ambiguity. Smaller UCBs get operational relief from prior approval but must ensure robust internal governance. Banks must act quickly to review and confirm fit-and-proper status of current MD/WTD, or initiate replacement. Non-compliance could invite supervisory action.
What you must do
- Review fit-and-proper status of existing MD/WTD within two months from June 25, 2021, and confirm to RBI regional office.
- If MD/WTD does not meet criteria, immediately start process for new appointment.
- Obtain signed deed of covenants (Annex I) from compliant MD/WTD.
- For UCBs with deposits <₹100 crore, formulate board-approved policy for MD/WTD appointments and report any appointment/re-appointment/termination to RBI.
- Ensure CEO appointed under earlier guidelines transitions to new framework after tenure or three years, whichever is earlier.
Who it affects
All Primary (Urban) Co-operative Banks, Salary Earners' Banks, Managing Directors and Whole-Time Directors of UCBs, Boards of Directors of UCBs
Are UCBs with deposits less than ₹100 crore completely exempt from these directions?
No, they are exempt only from the requirement of seeking prior RBI approval for appointment/re-appointment/termination of MD/WTD. They must still formulate a board-approved policy based on all other provisions of the directions and report any such action to the respective RBI regional office.
What is the deadline for reviewing the fit-and-proper status of existing MD/WTD?
UCBs must complete the review and confirm the status to the concerned RBI regional office within two months from the date of issue of the circular, i.e., by August 25, 2021.
What happens if the current MD/WTD does not meet the fit-and-proper criteria?
The UCB must immediately initiate the process for appointing a new MD/WTD who meets the criteria.