Acting on political interference, the Reserve Bank of India has barred MPs, MLAs and members of municipal corporations or other local bodies from holding the post of Managing Director (MD) or Whole Time Director (WTD) in urban cooperative banks.
These instructions are applicable to all Primary (Urban) Co-operative Banks (UCBs). RBI had exempted UCBs with deposits of less than Rs 100 crore from the requirement of prior approval of the Reserve Bank for appointment/re-appointment/termination of appointment of MD or WTD.
Under the propriety criteria, the person to be designated as MD or WTD shall not be engaged in any other business or profession; shall not hold the office of a member of Parliament or State Legislature or Municipal Corporation or Municipality or other local bodies; and shall not be a director of any company other than a company registered under section 8 of the Companies Act, 2013.
Further, he shall not be a partner of any firm carrying on any trade, business or industry; Should not hold a substantial interest in any company or firm as defined in section 5(n) read with section 56 of the Banking Regulation Act, 1949; and shall not be a director, manager, managing agent, partner or owner of any trading, commercial or industrial establishment.
Further, the person should not be of unsound mind and so declared by a competent court; Must not be a discharged insolvent; must not have been convicted by a criminal court of an offense involving moral turpitude; and should not be a director of any other co-operative bank or co-operative credit society. The individual will submit a self-declaration form on personal integrity.
While the exempted UCBs are not required to obtain prior approval, they are required to formulate a board approved policy for appointment/re-appointment/termination of appointment of MD or WTD based on all other provisions of these instructions.
These banks shall immediately report the appointment / reappointment / termination of appointment of MD or WTD to the respective Regional Offices of the Reserve Bank (in case of Urban Co-operative Banks under the jurisdiction of Supervision Department, Central Office, Mumbai Office).
The UCBs shall review the ‘fit and proper’ status of the existing Managing Directors in accordance with these instructions and confirm the same within a period of two months from the date of issue with the approval of the Board of Directors of the Regional Office concerned. round shape.
If the present MD does not fulfill the prescribed ‘fit and proper’ criteria, the UCB will immediately initiate the process for appointment of a new MD. If the UCB had appointed WTD, the bank would follow the same procedure to comply with these instructions.