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RBI Issued Directions for Appointment of MD/WTD in UCBs

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RBI-prescribes-qualifications-for-Managing-Directors,-whole-time-directors-of-UCBThe Reserve Bank of India (RBI) has issued directions relating to ‘Appointment of Managing Director (MD) / Whole-Time Director (WTD)’ in all Primary (Urban) Co-operative Banks (UCBs).

RBI’s Direction for MD/WTD Appointment:

i.Educational Qualifications:  He should be a graduate, preferably, with Qualification in banking (such as Diploma in Banking and Finance/ Chartered /MBA (Finance)) or Post-graduation in any discipline.

ii.Age Limit: From 35 years to 70 years. (the bank’s Boards are allowed to prescribe a lower retirement age).

iii.Experience Requirement: At least 8 years of experience at the middle/senior management level in the banking sector (including UCBs/ Non-banking finance companies (NBFCs)).

iv.Ineligible Persons: Member of Parliament (MP), Member of the Legislative Assembly (MLA), Member of Municipal Corporation or Municipality or other local bodies, persons engaged in business, trade or having substantial interest in any company.

v.Tenure of MD/ WTD: 

Criteria Tenure
Minimum period to hold the post after 1st appointment  3 years
Maximum period to hold the post at a time 5 years
Re-appointment

(in the same bank)

After a minimum gap of 3 years (In that 3 years they should not be appointed or associated with a bank (directly/indirectly))
Maximum Tenure to hold the post in the same bank  

15 years.

vi.Other Facts:

  • MD shall be an ex-officio member of the Board of Management (BoM).
  • The UCBs should constitute a ‘Nomination and Remuneration Committee (NRC)’ consisting of 3 directors from amongst the Board of Directors (BoD).
  • The performance of MD/WTD shall be reviewed by the Board annually.

Exemption from the regulation:

i.UCBs with a deposit size less than Rs 100 crore and Salary Earners’ Banks are exempted from the regulations and seeking prior approval of the RBI for appointment/re-appointment/termination of MD/WTD.

  • They are required to report after appointment to the respective Regional Offices of the RBI.

ii.UCBs that have appointed CEO with the prior approval of the RBI in terms of the guidelines on Constitution of BOM (December 31, 2019) are allowed to continue (till completion of tenure/3 years from initial appointment).

  • After the aforesaid period, UCBs are instructed to follow the directions for the appointment/re-appointment of MD.

Who are MD and WTD?

i.MD/Chief Executive Officer(CEO) is the person who is assigned for the management of the whole affairs of the UCB, as per the directions of the RBI from time to time. The MD should also function under the direction and control of the BoD.

ii.WTD/Executive Director may be appointed by the bank (based on need), the functions that can be performed by WTD will be decided by the BoD. The WTD should report to the MD.

Note – The RBI has issued the above directions 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), relating to appointment, re-appointment, termination and removal of MD and WTD.

Recent Related News:

On April 26, 2021, the RBI through its circular – “Corporate Governance in Banks – Appointment of Directors and Constitution of Committees of the Board”, has fixed 15 years as the tenure for the MD & CEOs or WTDs to hold their post in a bank.

About Reserve Bank of India(RBI):

Establishment– 1st April 1935
Headquarters– Mumbai, Maharashtra
Governor– Shaktikanta Das
Deputy Governors –  Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar