In a bid to professionalize the working of urban cooperative banks across the country, Reserve Bank of India has proposed constitution of Board of Management (BoM) for each of them.
RBI has, on Monday released draft guidelines on constituting Board of Management (BoM) for Primary (Urban) Cooperative Banks (UCBs). The guidelines propose that UCBs should constitute a BoM, in addition to the Board of Directors (BoD).
The guidelines say that regulatory approvals such as expansion of area of operation and opening of new branches may be allowed only for UCBs that have made such a provision in their bye- laws.
With a view to strengthening governance in UCBs, and as suggested during discussions with stakeholders, it is proposed to require UCBs to make a provision in their bye-laws for setting up a BoM.
But what the RBI or for that matter the Malegam Committee failed to note is the fact that majority of UCBs (about 50%) are unit banks having just single branch working in far flung areas. One, they are not able to afford professionals and two they are not able to get trained hands for remote areas, said a number of cooperators Indian Cooperative talked to.
In its release the Regulator has sought comments on the draft guidelines from banks and other stakeholders by July 24, 2018. The release says that the comments or feedback on the draft guidelines may be forwarded to Chief General Manager, Reserve Bank of India, Department of Cooperative Bank Regulation; C-7, First Floor, Bandra Kurla Complex, Bandra (East), Mumbai -400051.
It may be recalled that the Expert Committee on licensing of new Urban Cooperative Banks (2010) set up under the chairmanship of Y.H. Malegam had recommended, inter alia, that a BoM be constituted in every UCB, in addition to the BoD which was reiterated by the High Powered Committee on Urban Cooperative Banks (Chairman: R. Gandhi) constituted in January 2015.