Well managed co-operative credit societies should be given priority while granting licences for urban co-operative banks (UCBs), particularly in unbanked or inadequately banked centres, according to a RBI committee.
The co-operative credit societies should meet certain financial criteria such as profits, capital adequacy, and bad loans proportion, says the Report of the Expert Committee on Licensing of New UCBs.
The committee has prescribed four entry point norms ranging from Rs 50 lakh to Rs 5 crore, depending on how many states the new UCBs want to operate in.
To separate the ownership of a UCB as a co-operative society from its functioning as a bank, the committee has recommended a new organisation structure consisting of a board of management in addition to the board of directors.
New UCBs must have a board of management appointed by the board of directors. The Chief Executive Officer has to be appointed by the management panel , the committee said. While the directors will be responsible for laying down the broad contours of strategy, the board of management will be vested with the mandate to direct and control the day-to-day operations of the UCB within the limits set by the directors, said the report. At least 51 per cent of the members of the board of management should have special knowledge or practical experience.
“The separation of the ownership and management are welcome as under the current framework there is scope for the board of directors to influence management decisions on sanctioning of loans, sale of bad loans, giving certain concessions, et cetera,” said Mr Satish Marathe, General Secretary, Sahakar Bharati.
The directors can be members of the management board if they fulfil the specified conditions. Members of the management panel can be paid sitting fees, which can be decided by the directors subject to a ceiling specified by the RBI. The management panel has to follow a code of corporate governance specified by the apex bank.
The RBI would have unfettered powers to control and regulate the functioning of the UCB, the management board and the CEO in exactly the same way as it controls and regulates the functioning of the board of directors and the chief executive of a commercial bank, the committee added.
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