Opposing RBI diktat on BoMs; UCBs assert guideline to create trouble in decision making for people’s benefit

News Bharati    06-Jan-2020 13:33:29 PM
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New Delhi, January 6: Terming it in accordance to strengthen governance standards at urban cooperative banks (UCBs), the Reserve Bank of India on Tuesday had released the final guidelines for setting up a board of management (BoM) for such banks. However, asserting the new guideline to be impractical, the entire UCB sector including Sahakar Bharati, National and State Federations and Associations across the Country have strongly opposed the concept of setting up BoM in UCBs.

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Learning about the newly published guidelines last week, the Sahakar Bharati held an emergency Managing Committee meeting in Mumbai on 2nd January, 2020 on the backdrop of RBI Press Release regarding mandatorily constituting Board of Management (BOM) by UCBs having Deposits of Rs 100Crs and more. Taking into consideration, the UCBs unanimously resolved to appeal RBI to reconsider its guideline. Sahakar Bharati also penned a letter to RBI asking, “With BOM being accountable to RBI, and elected Board being accountable to Stakeholders, it is feared that two centres of decision making will emerge resulting in friction and disharmony, consequently affecting the working of the UCBs?”

It has been noted that the BoM addressed by the RBI will comprise of expert banking professionals. It will also exercise oversight on banking-related functions of the UCBs, assist the BoD on formulation of policies and any other related matter, specifically delegated to it by the board for proper functioning of the bank.

The letter has been signed by Sahakar Bharati President Ramesh Vaidya and its National General Secretary Dr Uday Joshi. Furthermore, in the letter, it added, “Presently, as per the RBI guidelines mandatorily two Expert Directors are already functioning on the Board of Directors of UCBs. Appointment of BoM is mere duplication and can result in major disruption in the decision-making process of the UCB.”

The letter also added, “We firmly believe that the purpose of safeguarding the interests of Depositors will not be served by constituting BOM. Sahakar Bharati is of the firm opinion that the ultimate governance of UCBs should be fully vested with the RBI.” The Managing Committee demanded that the resolution also unanimously appealed to the Finance Minister, in the ensuing Budget Session, to move Bill to amend the Banking Regulation Act to give full Regulatory powers in respect of UCBs.

Not only this, the letter also highlights on reminding RBI of its demand to amend the Banking Regulation Act and to provide full Regulatory powers to RBI to protect the interests of all Stakeholders, particularly, Depositors.