June 25, 2021
The Chairman / Managing Director / Chief Executive Officer
All Primary (Urban) Co-operative Banks
Madam / Dear Sir,
In terms of powers conferred under Sections 10, 10B, 10BB, 35A, 35B, 36AA and 53A (read with Section 56) of the Banking Regulation Act, 1949 (as amended), hereinafter called as “Act”, relating to appointment, re appointment, termination and removal of Managing Director (MD) and Whole-Time Director (WTD), the Reserve Bank, hereby, issues the following directions.
2. Applicability
2.1 These directions are applicable to all Primary (Urban) Co-operative Banks (UCBs). However, in exercise of the powers conferred under the section 53A read with section 56 of the Act, a notification No. DoR.HGG.GOV.668/12.10.000/2020-21 dated March 23, 2021 was published in the Part III -Section 4 of the Gazette of India dated June 12, 2021 by the Reserve Bank of India exempting UCBs with a deposit size of less than ₹100 crore as per preceding year’s audited balance sheet and all Salary Earners’ Banks, inter-alia, from the requirement of seeking prior approval of the Reserve Bank under section 35B(1)(b) read with section 56 of the BR Act, 1949, for appointment / re-appointment / termination of appointment of MD or WTD. While the exempted UCBs are not required to obtain prior approval, they are required to formulate a Board approved policy based on all the other provisions of these directions for appointment / re appointment / termination of appointment of MD or WTD. These banks shall immediately report the appointment / re-appointment / termination of appointment of MD or WTD to respective Regional Offices (Department of Supervision, Central Office, in case of UCBs under jurisdiction of Mumbai office) of the Reserve Bank.
2.2 UCBs which have appointed CEO with the prior approval of the Reserve Bank in terms of the guidelines contained in the circular DoR (PCB). BPD.Cir.No.8/12.05.002/2019-20 dated December 31, 2019 on Constitution of Board of Management in Primary (Urban) Co-operative Banks, may continue with the CEO so appointed till completion of his / her tenure or for a period of three years from the date of initial appointment, whichever is
earlier. After the aforesaid period, UCBs shall follow the directions issued herein for appointment / re-appointment of MD.
2.3 UCBs, other than those stated in para 2.2 above, shall review the ‘Fit and Proper’ status of the existing MD in terms of these directions and confirm the same, with the approval of BoD, to the concerned Regional Office (Department of Supervision, Central Office, in case of UCBs under jurisdiction of Mumbai office) of Reserve Bank within a period of two months from the date of issue of this circular. In case, the present MD does
not satisfy the prescribed ‘Fit and Proper’ criteria, the UCB shall initiate the process for appointment of new MD immediately. If a UCB had appointed WTD, the bank shall follow the same procedure to comply with these directions.
2.4 All UCBs shall obtain a deed of covenants in the format annexed (Annex I) from the present MD/ WTD who is found to be complying with these directions.
3. Appointment of Managing Director / Whole-Time Director
3.1 Managing Director, who may also be designated as Chief Executive Officer or by any other name, is a person who is entrusted with the management of the whole, or substantially the whole of the affairs of a UCB, subject to the regulations or directions issued by the Reserve Bank from time to time. MD shall function under the overall general superintendence, direction and control of the Board of Directors (BoD).
3.2 If a UCB decides to appoint Whole-Time Director (WTD), who may also be designated as Executive Director or by any other name, the need for such an appointment may be decided by the bank keeping in view the growth in business, expansion of activities, geographical footprints and organisational vision for growth in the medium and long term. The creation of the post of WTD and the functions that can be performed may be decided
by the BoD and approved by the General Body of the bank. The WTD shall report to the Managing Director.
3.3 The UCBs shall ensure that the following ‘fit and proper’ criteria is fulfilled by the person being appointed as MD/ WTD.
3.4 Eligibility
- 3.4.1 The person shall be a graduate, preferably, with
- (a) Qualification in banking/ co-operative banking such as CAIIB / Diploma in Banking and Finance / Diploma in Co-operative Business Management or equivalent qualification; or
- (b) Chartered / Cost Accountant / MBA (Finance); or
- (c) Post graduation in any discipline.
3.4.2 The person shall not be below the age of 35 years and above the age of 70 years at any time during his/ her term in office. However, within the overall limit of 70 years, as part of their internal policy, individual bank’s Boards are free to prescribe a lower retirement age.
3.4.3 The person shall have a combined experience of at least eight years at the middle / senior management level in the banking sector (including the experience gained in the concerned UCB) or non-banking finance companies engaged in lending (loan companies) and asset financing.
3.4.4 Knowledge of regional language may be considered as an advantage.
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