RBI strengthens CEO standards for cooperative banks

MUMBAI: Taking a strong stance on the governance of urban cooperative banks, the Reserve Bank of India (RBI) on Friday announced minimum qualifications and age limits for CEOs and full-time directors of these banks as part of its “fit and proper” criteria.
Rules are gaining in importance as in many co-ops the nomination is political and the central bank is slowly tightening its grip on them. The RBI gained the power to regulate cooperatives last year in June after the government issued an ordinance to place 1,482 urban cooperative banks and 58 multi-state cooperatives under central bank supervision.
The new rules come in the wake of the collapse of several urban cooperative banks, the largest being the Punjab and Maharashtra Cooperative Bank (PMC) whose CEO conspired with some members to divert funds to real estate developers.
The RBI has asked all cooperative banks where the CEO has been appointed without his approval to review the proper and appropriate status of the existing CEO in terms of current guidance. RBI guidelines require the MD to be a graduate and preferably have additional qualifications, such as a degree in banking, an approved expense account, or a graduate degree in any discipline.
The minimum age for a CEO has been set at 35 and the maximum age at 70 with at least eight years’ experience in middle or senior management in the banking sector. Also, the post of director general and full-time director cannot be held by the incumbent for more than 15 years.
PMC Moratorium for another 6 months The RBI on Friday extended the moratorium on PMC Bank for another six months.
“In response to the expression of interest (EOI) dated November 3, 2020, launched by PMC Bank for its reconstruction, some proposals have been received. After careful consideration, the proposal from Centrum Financial Services (CFSL) and Resilient Innovation (BharatPe) has proven to be feasible at first glance, ”said the RBI.
He added that given the time required for the completion of the various activities involved in the process, it is deemed necessary to extend the leadership until December 31, 2021.

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