Karnataka-based Kanara District Central Co-operative (DCC) Bank Chairman, Yellapur MLA and former Karnataka Minister S.M. Hebbar has asserted that the tenure and eligibility of directors of cooperative banks are governed by the Karnataka Cooperative Societies Act, 1959, and fall within the jurisdiction of the State Government, not the Reserve Bank of India (RBI).
Speaking to Indian Cooperative over the phone, Hebbar commented on the ongoing legal dispute concerning RBI’s directions on the tenure and eligibility of directors of cooperative banks. He said elections to cooperative banks are conducted by the State Cooperative Election Authority under the provisions of the Karnataka Cooperative Societies Act.
He maintained that elected directors derive their mandate from members and can be disqualified only on grounds specified under the State Act, such as loan default, conviction or other statutory disqualifications, and not through RBI directions relating to tenure.
“RBI’s responsibility is to regulate banking operations, safeguard depositors’ interests and ensure financial discipline. However, matters relating to the election and tenure of directors are part of the democratic governance framework under the State Cooperative Act,” he said.
Hebbar emphasized that cooperative institutions function on the principles of democratic governance and member participation. He urged that the autonomy of the cooperative sector be respected while allowing RBI to focus on prudential regulation, financial stability and depositor protection.
Kanara DCC Bank, with a business turnover of around Rs 5,000 crore, is among Karnataka’s oldest cooperative banks, with a history spanning more than a century.
Hebbar’s remarks come against the backdrop of an ongoing case before the Karnataka High Court’s Bengaluru Bench concerning RBI’s powers over the tenure and eligibility of directors of cooperative banks.
The High Court has granted interim relief to the petitioners by staying the operation of the RBI directions until the next hearing, which is expected to take place later this month. The matter remains sub judice.
