What changed
RBI has introduced a structured compliance framework for Tier 3 and Tier 4 UCBs, mandating a board-approved compliance policy and a Chief Compliance Officer. Tier 4 UCBs must comply by April 1, 2023, while Tier 3 UCBs have until October 1, 2023. Tier 1 and Tier 2 UCBs remain under existing guidelines.
What it means for you
Larger UCBs must now formalize compliance as a distinct function, elevating its role in governance and risk management. The CCO will oversee compliance risk identification, new product monitoring, and ensure adherence to all regulatory and conduct standards. This increases accountability and may require additional resources and board-level attention.
What you must do
- Classify your UCB's tier (Tier 3 or 4) and confirm applicability; Tier 1 and 2 UCBs follow existing rules.
- Draft a board-approved Compliance Policy and appoint a Chief Compliance Officer by the respective deadline.
- Ensure the CCO is part of the new product committee and that new products are intensively monitored for six months.
- Conduct an annual compliance risk assessment and report findings to the board or its committee.
- Place this circular before the board at the next meeting to devise an implementation strategy.
Who it affects
Tier 3 and Tier 4 Urban Co-operative Banks, Chief Compliance Officers of UCBs, Board of Directors of UCBs, Senior management of UCBs
Which UCBs are covered by this circular?
Only Tier 3 and Tier 4 Urban Co-operative Banks are covered. Tier 1 and Tier 2 UCBs continue under existing guidelines. UCBs under All Inclusive Directions are exempt.
What is the deadline for appointing a CCO?
Tier 4 UCBs must appoint a CCO and put in place the compliance function by April 1, 2023. Tier 3 UCBs have until October 1, 2023.
What are the key responsibilities of the compliance function?
The function must assist the board in implementing the compliance policy, identify compliance risks, monitor new products for at least six months, and ensure adherence to all statutory and regulatory requirements.