The prescription for double Board of control- Board of Management and Board of Directors by the Malegam Committee for granting licence to Urban Co-op Banks has put the government in a fix. It has failed to take a call though the Malegam Committee submitted its report long time back.
A hesitant RBI deemed it fit to seek Law Ministry’s opinion on the ticklish issue. Now the Panel’s report is gathering dust in the Union Law Ministry which is expected to take a final call on the duel control of BoD and BoM sooner than later.
Paralyzed in the wake of elections, Ministry is hesitating to take action in the fear of attracting wrath of the Election Commission.
Talking to Indian Cooperative, one of the directors of the NAFCUB and the head of its Jharkhand Chapter said” the licence for Urban cooperative bank pending in the court of the government may have to wait till a new government is formed”.
There should be segregation of the ownership of the UCB as a co-operative society from its functioning as a bank. The new organization structure shall consist of a Board of Management in addition to the Board of Directors.
The Board of Directors (BoD) would be elected in accordance with the provisions of the respective Co-operative Societies Acts and would be regulated and controlled by the RCS / CRCS.
The (BoD) will establish a Board of Management (BoM), consisting of persons with professional skills, which shall be entrusted with the responsibility for the control and direction of the affairs of the Bank assisted by a CEO who shall have the responsibility for the management of the Bank.
RBI would have unfettered powers to control and regulate the functioning of the UCB and of its BoM and of the CEO in exactly the same way as it controls and regulates the functioning of the Board of Directors and the Chief Executive in the case of a commercial bank.
While the BoD will be responsible for laying down the broad contours of strategy, the BoM will be vested with the mandate to direct and control the day-to-day operations of the UCB within the limits set by the BoD. At least 51 per cent of the members of the BoM should have special knowledge or practical experience in the matters specified in Section 10 A(2) of the B. R. Act, 1949.
Members of the BoD can be members of the BOM provided they fulfill the conditions specified. Members of the BoM can be paid such sitting fees as the BOD may decide subject to a ceiling to be specified by RBI.
This duel structure is foxing the RBI as well as the govt which has not succeeded in humping over the problem yet.