Cooperative banks will need RBI approval for CEO appointment
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After capping lending to a single borrower and raising the priority sector lending requirements for UCBs, the RBI in its final guidelines on constitution of Board of management in UCBs, said that UCBs with deposit size of Rs 100 crore and above, will also require prior approval of RBI for appointment of their CEOs.
The central bank’s announcement is significant considering its supervision practices came in for criticism after a gross violation of lending norms by a better run UCB-PMC Bank as a result of which the bank is under an RBI appointed administrator with depositors also facing withdrawal restrictions.
The announcement is a part of the final guidelines on the constitution of the Board of Management(BoM), as announced in statement on developmental and regulatory policies on December 05, 2018, which was released on Friday.
RBI has also decided to implement the suggestion of putting in place Board of Management in addition to the Board of directors (BoD) in UCBs with deposit size of Rs 100 crore and above. These guidelines is however not applicable to Salary Earner’s Bank.
It would be mandatory for the larger UCBs to constitute BoM for seeking approval to expand their area of operation and/or open new branches.
UCBs with a deposit size less than Rs 100 crore and Salary Earners’ Banks are exempted from constituting BoM although they are encouraged to do so voluntarily, the guidelines say.
According to the guidelines that the Board of Management would report to the BoD and shall exercise oversight over the banking related functions of the UCBs, assist the BoD on formulation of policies and any other related matter specifically delegated to it by the BoD for proper functioning of the bank. #casansaar (Source - Economic Times)
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