What changed
This master circular updates the previous July 2009 circular, consolidating all guidelines on board of directors for primary urban co-operative banks up to June 30, 2010. It reiterates the requirement for at least two directors with banking experience or professional qualifications (law, accountancy, finance), except for salary earners banks. It also includes annexures with Madhava Das Committee recommendations and a calendar of reviews for board oversight.
What it means for you
For urban co-operative banks, this circular reinforces the need for professional and knowledgeable boards, moving beyond mere compliance to active policy formulation and supervision. Banks must ensure their boards include qualified individuals and adhere to strict dos and don'ts, especially regarding loan policies and review of RBI circulars. This raises governance standards and may require changes in board composition or training.
What you must do
- Review your board composition to ensure at least two directors have banking experience or professional qualifications in law, accountancy, or finance.
- Update your bye-laws to include provisions for professional directors, unless you are a salary earners bank.
- Ensure all RBI and government circulars are circulated to every board member and placed before the board for action.
- Adopt and follow proper loan policies as directed by the board, and maintain a calendar of reviews as per the circular.
Who it affects
Primary (Urban) Co-operative Banks, Board of Directors of UCBs, Chief Executive Officers of UCBs, State/Central Government authorities overseeing UCBs
What are the minimum qualifications required for directors on a UCB board?
The circular requires at least two directors to have suitable banking experience at middle/senior management level or relevant professional qualifications in law, accountancy, or finance. This does not apply to salary earners banks.
Does this circular change the role of the board compared to day-to-day management?
No, it reinforces that the board is primarily for policy formulation and overall supervision, leaving day-to-day administration to the chief executive officer.
What happens if a director is ineligible under the model by-laws?
Persons engaged in money lending, financing, investment activities, or convicted of criminal offences are ineligible to be directors. Banks must ensure compliance with model by-law provisions.