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Primary urban co-operative banks must maintain at least two professional directors on their boards and must not create non-statutory honorary positions. The Reserve Bank of India issues this master circular to consolidate instructions on board composition, roles, committees, reviews, donations, and director fees. Banks with a deposit size of Rs 100 crore or above and non-salary earners must constitute a Board of Management. Banks with an asset size of Rs 5000 crore or above must set up a Risk Management Committee of the Board. Urban co-operative banks cannot give donations to trusts and institutions where directors or their relatives hold a position or hold an interest.
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RBI/2024-25/01 DoR.HGG.GOV.No.1/18.10.010/2024-25 April 1, 2024
The Managing Director/Chief Executive Officer All Primary (Urban) Co-operative Banks
Dear Sir/Madam,
Master Circular on Board of Directors - UCBs
Please refer to our Master Circular DCBR.BPD (PCB/RCB) Cir.No.2/14.01.062/2015-16 dated July 1, 2015 on the captioned subject (available at RBI website www.rbi.org.in). The enclosed Master Circular consolidates and updates all the instructions / guidelines on the subject issued till date.
Yours faithfully
(Scenta Joy) Chief General Manager
Master Circular - Board of Directors - UCBs
| S.No. | Content |
|---|---|
| 1 | Constitution of Board of Directors |
| 2 | Role of Directors |
| 3 | Committees of the Board |
| 4 | Calendar of Reviews – Matters to be placed before the Board of Directors |
| 5 | Donations to trusts and institutions where directors or their relatives hold position or are interested |
| 6 | Payment of fees and allowances to Directors |
| 7 | Annex 1 - Recommendation made by the Madhava Das Committee on Urban Co-operative Banks with regard to Board of Directors |
| 8 | Annex 2 - Reviews to be submitted to the Board of Directors of primary (urban) co-operative banks |
| 9 | Appendix – List of Circulars consolidated in the Master Circular |
Master Circular - Board of Directors – UCBs
1.1 Primary (urban) co-operative banks (UCBs or banks) have been functioning under the regulation and supervision of Reserve Bank of India (Reserve Bank or RBI) in terms of the powers vested in it inter alia under the Banking Regulation Act, 1949 (BR Act) and the Reserve Bank of India Act, 1934 (RBI Act).
1.2 The directors on the boards of UCBs must be knowledgeable and persons of high integrity. To ensure professionalism in the Board, banks should, at all times, have at least two professional directors, i.e., persons with suitable banking experience (at middle/senior management level) or with relevant professional qualification in the fields of law, accountancy or finance. Banks should also have a suitable provision in their byelaws to ensure this. However, these instructions would not be insisted upon in case of Salary Earners' Banks in view of the nature of their membership.
1.3 UCBs (other than those having deposit size less than Rs.100 crore and salary earners’ banks) are also required to constitute a Board of Management (BoM) to facilitate professional management and focused attention to their banking-related activities, by making suitable amendments to their bye-laws, in accordance with the guidelines contained in RBI circular DoR(PCB).BPD.Cir.No.8/12.05.002/2019-20 dated December 31, 2019.
1.4 Since the directors are elected from amongst the members (except co-opted and nominated directors), the persons who are not eligible for admission even as members cannot become directors of UCBs. In particular, persons engaged in money lending, financing and investment activities, either in individual capacity or as proprietor/partner/employee/director of any concern as also those convicted of any criminal offences including moral turpitude are ineligible in terms of clause b (ii) of the model by-law no.9 and/or the provisions contained in the co-operative societies law concerned. Besides, certain eligibility/qualification/disqualification criteria for becoming director in a UCB are also prescribed in the BR Act and the co-operative laws concerned.
1.5 The recommendations made by the “Committee on Urban Co-operative Banks”, headed by Shri Madhava Das, regarding the Board of Directors of UCBs and recommended by the Reserve Bank for adoption by the banks are given in Annex 1.
1.6 It was observed during the course of supervisory reviews that some of the UCBs have adopted the practice of creating honorary designations (remunerated or otherwise) / conferring titles at Board level, such as Chairman Emeritus, Group Chairman, etc., which are not recognised in applicable statutes or regulations. While such positions/titles may be indicative of certain privileges/rights for the incumbent to access all board materials and participate in board/committee meetings, enforcing liability or obligations on such person may be difficult. Such positions may be seen as creating conflicts of interest as well as creation of a parallel or shadow authority impeding effective and independent functioning of the legally constituted board in the best interest of all its stakeholders. As such, UCBs are directed not to create any honorary positions/titles at Board level or confer such titles that are non-statutory in nature[1].
2.1 The Board of Directors (BOD or Board) is primarily concerned with formulation of policies keeping in view the applicable statutory provisions and the guidelines issued by the RBI. The Board should also exercise overall supervision and control over the functioning of the bank, leaving the day-to-day administration to the Managing Director (MD) / Chief Executive Officer (CEO).
2.2 It should be ensured that all circulars and other material relating to policies issued by the RBI are placed before the Board for information and appropriate action.
2.3 Directors of UCBs are advised to be guided inter alia by the following guidelines[2]:
