The Andhra Pradesh State Cooperative Urban Banks & Credit Societies Federation Ltd. has urged the Reserve Bank of India (RBI) committee framing model bye-laws for Urban Cooperative Banks (UCBs) to protect the constitutional identity, democratic control and autonomous functioning of cooperative banks.
In a detailed submission to the RBI committee, following its earlier questionnaire response and interaction with South Zone federations and banks in Bengaluru on August 18, the federation raised concerns over the proposed governance framework for UCBs.
The federation argued that model bye-laws should clearly operate within the constitutional and statutory framework of the respective State Cooperative Societies Act, Rules or the Multi-State Cooperative Societies Act, as applicable. It said elections, board tenure and other matters concerning elected directors should remain governed by cooperative legislation to preserve democratic member control.
It also opposed incorporating frequently changing RBI regulatory provisions, such as digital banking, cyber security, write-offs and One-Time Settlement (OTS) norms, into static bye-laws, arguing that such matters should remain within RBI’s regulatory framework.
The federation invoked the 97th Constitutional Amendment, which recognized the right to form cooperative societies and emphasized voluntary formation, autonomous functioning, democratic member control and professional management.
It further cited the Supreme Court’s judgment in Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Ltd., stressing the distinction between regulation of banking business and regulation of the cooperative character of institutions.
The federation also urged the RBI panel to maintain flexibility in governance norms, considering the wide differences among UCBs in size, membership, geographical reach, technology and business models.
Significantly, it requested the committee to defer mandatory bye-law amendments until pending constitutional and statutory issues concerning UCB governance before various High Courts, including the Madras High Court, are judicially resolved.
The federation said a balanced model should combine prudential banking regulation with State cooperative law, professional management with democratic member control, and uniformity in essential banking standards with flexibility for individual UCBs.
