This brings UCB regulations in line with other scheduled commercial banks, for whom the ‘fit and proper’ criterion is applied. The RBI had said such criterion would apply for UCBs too, and having a board of management would be mandatory “for allowing such banks
to expand their area of operation and open new branches”.
These UCBs must obtain prior approval of the RBI for appointing the CEO.
“In this connection, it is advised that scheduled UCBs shall approach the Department of Regulation of Reserve Bank for approval, at least three months prior to the end of tenure of the incumbent CEO,” the RBI said.
The UCBs should also submit annual returns furnishing details of the members of the BoM, as of December 31 each year. UCBs with deposit size of less than Rs 100 crore may continue with their usual practice, but “for having good governance practices, such banks
may also constitute BoM, if they so desire,” the central bank added.
The RBI has been tightening norms for UCBs after the recent scam in Punjab and Maharashtra Cooperative Bank (PMC).
On Monday, the RBI had released draft guidelines that mandated UCBs to lend 75 per cent of their loans to the priority sector, ensure they have half their loans of ticket size below Rs 25 lakh, and increase the single and group borrower exposure to a maximum of 10 per cent and 25 per cent of the core capital, respectively.