What changed
RBI observed that some UCBs were conferring honorary designations at board level, such as Chairman Emeritus or Group Chairman, which are not recognized in statutes or regulations. These positions can create conflicts of interest and parallel authority, undermining the legally constituted board. RBI now prohibits creation of any such non-statutory titles and mandates removal of existing ones within one year.
What it means for you
UCBs must immediately stop appointing honorary board-level positions and review any existing ones for elimination within the deadline. This ensures clear accountability and prevents shadow governance structures. Banks should update their board charters and governance policies to comply, avoiding regulatory action under the Banking Regulation Act.
What you must do
- Cease creation of any honorary board-level titles like Chairman Emeritus or Group Chairman immediately.
- Identify and list all existing honorary board positions within your UCB.
- Eliminate all such non-statutory titles within one year from April 21, 2022.
- Update board governance policies to explicitly prohibit such designations.
- Ensure board meetings and materials are restricted to legally constituted members only.
Who it affects
All Primary (Urban) Co-operative Banks, Board members and chairpersons of UCBs, Compliance and governance teams in UCBs
What exactly does RBI consider an honorary board-level title?
Examples include Chairman Emeritus, Group Chairman, or any similar designation not recognized in banking statutes or regulations, whether remunerated or not.
What is the deadline to remove existing honorary positions?
UCBs must eliminate all such existing titles within one year from the circular date, i.e., by April 21, 2023.
What happens if a UCB does not comply?
RBI has issued these directions under Section 35A and Section 36(1)(d) of the Banking Regulation Act, 1949, so non-compliance may invite supervisory action or penalties.