What changed
RBI consolidated and updated all existing instructions on UCB board composition into a single Master Circular, replacing the 2015 version. Key updates include reiteration of mandatory professional directors (at least two) and Board of Management for UCBs with deposits over Rs.100 crore, and a clear ban on honorary designations like Chairman Emeritus.
What it means for you
UCBs must ensure their boards have at least two directors with banking experience or professional qualifications in law/accounting/finance. Larger UCBs need a Board of Management for focused oversight. The ban on honorary titles prevents conflicts of interest and ensures clear accountability. Non-compliance could lead to supervisory action.
What you must do
- Review board composition to ensure at least two professional directors as defined; amend byelaws if needed.
- Constitute a Board of Management if deposit size exceeds Rs.100 crore, per December 2019 circular.
- Remove any honorary designations (e.g., Chairman Emeritus) and stop conferring such titles.
- Update byelaws to reflect eligibility/disqualification criteria for directors as per BR Act and co-operative laws.
- Ensure all directors meet integrity and knowledge standards; verify no money lending or criminal background.
Who it affects
All Primary (Urban) Co-operative Banks, Salary Earners' Banks (exempted from professional director requirement), Board of Directors and Management of UCBs, RBI supervisory teams
Are Salary Earners' Banks exempt from the professional director requirement?
Yes, the circular states that the requirement for at least two professional directors will not be insisted upon for Salary Earners' Banks due to their membership nature.
What is the deadline for implementing the Board of Management requirement?
The circular does not specify a new deadline; it references the earlier circular of December 31, 2019, which already required UCBs with deposits over Rs.100 crore to constitute a Board of Management. Banks should comply immediately.
Can a UCB continue with an honorary title like Chairman Emeritus?
No. The circular explicitly states such positions are not recognised in statutes or regulations, create conflicts of interest, and should not be adopted.