Reserve Bank Took Tough Decision To Save Cooperative Banks

Reserve Bank took a tough decision to save Sahkari Bank, barred MPs, MLAs, and members of municipal corporations from becoming MD.

To save the Sahkari Bank from sinking, the country’s banking regulator Reserve Bank of India has taken a big decision.

Acting on political interference, the Reserve Bank has barred MPs, MLAs, and members of municipal corporations or other local bodies from holding the post of managing director (MD) or whole-time director in urban cooperative banks.

These instructions are applicable to all Primary (Urban) Co-operative Banks (UCBs).

RBI had exempted UCBs with deposits of less than Rs 100 crore from the requirement of prior approval of the Reserve Bank for appointment/ reappointment/ termination of appointment as MD or WTD.

Under the propriety criteria, the person to be designated as MD or WTD shall not be engaged in any other business or profession.

Shall not hold the office of a member of Parliament or State Legislature or Municipal Corporation or Municipality or other local bodies.

Shall not be a director of a company other than a company registered under section 8 of the Companies Act, 2013.

Further, he shall not be a partner of any firm carrying on any trade, business, or industry.

Should not hold a substantial interest in any company or firm as defined in section 5(n) read with section 56 of the Banking Regulation Act, 1949 and is not a director, manager, managing agent, partner, or owner of any trading, commercial or industrial establishment Will happen.

Also, the person should not have been convicted by a criminal court and should not be a director of any other co-operative bank or co-operative credit society.

The individual will submit a self-declaration form on personal integrity. While the exempted UCBs are not required to obtain prior approval.

They need to formulate a board-endorsed policy for appointment/re-appointment/termination of appointment of MD or WTD based on all other provisions of these instructions.

These banks shall immediately report to the respective Regional Offices of the Reserve Bank (in case of Urban Co-operative Banks under the jurisdiction of Supervision Department, Central Office, Mumbai Office) the appointment/re-appointment/termination of appointment of MD or WTD.

UCBs shall review the fit and proper position of the existing Managing Directors in accordance with these instructions and confirm the same with the approval of the Board of Directors of the Regional Office concerned within a period of two months from the date of issue.

The existing MDs of the prescribed UCBs shall review the proper position of the existing Managing Directors in accordance with these instructions and confirm the same with the approval of the Board of Directors of the Regional Office concerned within a period of two months from the date of issue.

If the present MD does not fulfill the prescribed fit and proper criteria, UCB will immediately initiate the process for the appointment of a new MD. If the UCB had appointed WTD, the bank would follow the same procedure to comply with these instructions.