RBI Central Board Director and senior cooperative leader Satish Marathe has written to Union Home and Cooperation Minister Amit Shah, seeking his intervention in the issue arising from the Reserve Bank of India’s recent communication to certain cooperative banks in Maharashtra regarding the tenure of directors on cooperative bank boards.
A copy of the letter was handed over to Shah on Saturday by leaders of Maharashtra’s cooperative banking sector during the inauguration of the new headquarters building of Kaijs Bank in Ichalkaranji. Marathe expressed concern that RBI’s interpretation of the amended tenure provisions could have far-reaching implications for the functioning of cooperative banks across the country.
In his letter, Marathe stated that RBI’s interpretation of the amended provisions under the Banking Regulation Act could render directors who have completed a continuous tenure of 10 years ineligible to continue on the boards of cooperative banks. According to him, nearly 65-70 per cent of directors in the sector may be affected by the move.
He warned that the simultaneous exit of such a large number of experienced directors could adversely impact governance, institutional continuity and decision-making in cooperative banks. It could also trigger a prolonged cycle of elections across the sector, causing significant disruption and affecting all stakeholders, including depositors and borrowers.
To avoid such a situation, Marathe urged the Centre to consider issuing a suitable ordinance or notification that would permit affected directors to continue until the completion of their existing board terms.
The appeal follows RBI’s recent communication to certain Urban Cooperative Banks stating that, under Section 10A(2A)(i) read with Section 56 of the Banking Regulation Act, 1949, as amended by the Banking Laws (Amendment) Act, 2025 and effective from August 1, 2025, directors who have completed a continuous tenure of 10 years or more on or after that date would be ineligible to continue in office.
Besides submitting the letter, cooperative banking leaders also presented a memorandum to Shah seeking intervention on key issues affecting Urban Cooperative Banks (UCBs).
The memorandum sought regulatory reforms, including a review of director tenure norms, inclusion of UCBs in the Lead Bank Scheme, easing branch expansion and mobile banking rules, resumption of new banking licences, and rationalisation of Priority Sector Lending targets.
The sector also urged measures to strengthen cooperative banks through relaxation of provisioning and exposure norms, creation of a support fund, improved recovery mechanisms, access to the Liquidity Adjustment Facility (LAF), and reforms in insolvency and loan recovery processes.
