Page 19 - Banking Finance January 2020

CO-OPERATIVE BANK NEWS

CO-OPERATIVE BANK

NEWS
NEWS
NEWS
NEWS
NEWS

RBI wants urban coop- RBI issues norms to shore up governance standards at

erative banks to focus urban cooperative banks
mainly on priority sector In order to strengthen governance standards at urban cooperative banks (UCBs),
the Reserve Bank of India released the final
Reserve Bank of India (RBI) on guidelines for setting up a board of management
Mondaproposed that the single and (BoM) for such banks. According to the guide-
group bor- lines, UCBs, with deposits of Rs. 100 crore and
rower limits more, will constitute the BoM, which will be a
of urban co- mandatory requirement for opening new
operative branches.
banks (UCBs)
should be “The board of directors (BoD) of a UCB perform both the executive and super-
visory roles, and has the responsibility to oversee the functioning of UCB as a
brought down and half the loans
given should not be of more than Rs cooperative society, as well as its functions as a bank. Since UCBs are accepting
25 lakh, while the priority sector lend- public deposits, it is imperative that a separate mechanism be put in place to
protect the interests of depositors," said the RBI in its notification.
ing targets should be raised steeply.
The BoM will comprise expert banking professionals. It will also exercise over-
UCBs’ target for priority-sector lend- sight on banking-related functions of the UCBs, assist the BoD on formulation of
ing has been proposed at 75 per cent
policies and any other related matter, specifically delegated to it by the board
of their credit from 40 per cent now. for proper functioning of the bank, it added.
The target has to be reached in
phases — 50 per cent by March The BoM will also oversee the management of fund and borrowings, and
2021, 60 per cent by March 2022, recommend action for recovery of non-performing assets (NPAs). The BoD will
and 75 per cent by March 2023. continue to be the apex policy setting body and constitute various committees
of the board, including the BoM, to assist the board in carrying out its respon-
The RBI proposed that the single sibilities.
and group borrower limits should be
10 per cent and 25 per cent, respec- The BoM will be constituted by the BoD within a period of one year from the
date of the circular, and have a minimum of five members and may have as
tively, of a bank’s tier-1 capital.
many as 12 members. The CEO will be a non-voting member, the RBI said. The
At present, UCBs are allowed to chairman of the BoM may be elected by the members from among themselves,
have exposures of up to 15 per cent or appointed by the BoD, it added.
and 40 per cent of their capital funds UCBs will have to make suitable amendments to their by-laws, with the approval
to a single borrower and a group of of the general body and registrar of cooperative societies to provide for the
borrowers, respectively.
constitution of BoM, in addition to the BoD.

BANKING FINANCE | JANUARY | 2020 | 19