Urban Cooperative Banks on which the Reserve Bank of India has imposed all-inclusive directions (AID) are exempted from constituting the board of management (BOM).
Last week, Maharashtra Urban Cooperative Bank Federation (MUCBF) CEO Sayali Bhoir had written a letter to Neeraj Nigam, CGM, RBI with the title, “Requisition to exclude UCBs under AID from forming BOM”.
Giving a reply to the letter, the Department of Regulation wing of the RBI wrote, “In this connection, we advise that UCBs (with deposit size of Rs.100 crore and above) under AID have been exempted from the constitution of BoM. However, such UCBs must constitute BoM, once the directions are withdrawn by the Bank”,
In her letter, Bhoir had written, “The Reserve Bank vide its above referred letter mandated UCBs with deposit size of Rs. 100 crore and above, to constitute BoM and also advised UCBs with a deposit size less than Rs 100 crores and Salary Earners’ Banks to constitute BoM, if they so desire for having good governance practices”.
“However, there is no clarity about UCBs under all inclusive directions u/s. 35A (read with section 56 of the B.R. Act 1949) for constitution of BoM. As you are aware, the imposition of All-inclusive directions (AID) on an Urban Co-operative Bank (UCB), inter alia, restricts the bank from discharging its liabilities and performing banking functions except those permitted by the Reserve Bank, we therefore request you to kindly exempt such banks from forming BoM and issue necessary instructions accordingly at the earliest”, according to the letter sent by MUCBF.
It is to be mentioned here that the RBI has imposed directions on several urban cooperative banks across India.
Readers would recall that in December, 2019, the RBI asked every UCBs with deposit size of Rs 100 crore to constitute Board of Management (BoM) in addition to the Board of Directors. In addition to the functions as furnished in the RBI letter, the BoD may delegate such powers as deemed necessary for the proper functioning of the bank.
“UCBs shall constitute a BoM by making suitable amendments in their bye-laws. The BoM shall comprise persons with special knowledge and practical experience in banking to facilitate professional management and focused attention to the banking related activities of the UCBs through appropriate amendments to their bye-laws, in accordance with the enclosed guidelines following the due process”, the RBI circular read.
It bears recall that the UCB leaders have been opposing the idea of BoM since the start.
The leaders reject RBI’s insinuation that the elected Board of Directors (BoD) of UCBs are less effective and lack professionalism and that their performance has been inferior.
The proposed BoM is like any other committee of the BoD. Therefore, calling it BoM rather than a Committee of BoD sounds like instituting another parallel layer engaged in similar functions. This will result in duplication, consequent delays and disharmony in the overall working of the UCB Sector, was the crux of arguments offered by several leaders.
This is an important delicate issue, ucbs had already expressed their views back in 2011 before the expert committee.despite negative response with actual realities and facts on very sound grounds.But Rbi preferred to go ahead with the idea of BOM for best reasons known to them.professionalism always existed in ucbs but nothing can be done if the top management indulges in malpractice and fraudulent acts.it can happen in any institution even BOM may not be capable to check that.even in Psbs and other commercial banks frauds are taking place.most unfortunate part is our own co op sector stalwart is on the central board of Rbi who seems to have agreed to rbi dictates or otherwise.let us hpoe for the best. S s sharma delhi