Lok Sabha Question No. 1742 (UNSTARRED), answered on 2018-07-27
Subject: Constitution of BoM in UCBs
Ministry: FINANCE
Asked by: (ADV.) JOICE GEORGE, ANURAG SINGH THAKUR, VINOD KUMAR BOIANAPALLI

## Government of India Ministry of Finance Department of Financial Services LOK SABHA

Unstarred Question No. 1742 To be answered on Friday, July 27, 2018/Shravana 5, 1940 (Saka)

## Constitution of BoM in UCBs

## 1742. ADV. JOICE GEORGE: SHRI ANURAG SINGH THAKUR: SHRI B. VINOD KUMAR.

Will the Minister of FINANCE be pleased to state:

- (a)  whether  the  Government  is  planning  to  set  up  a  Board  of  Management  (BoM)  in addition  to  Board  of  Directors  (BoD)  as  per  Malegam  Committee  in  all  Urban  Cooperative  Banks  (UCBs)  having  deposits  of  over  Rs.  100  crore  within  one  year  to strengthen governance and promote professional management in these banks and if so, the details thereof;
- (b)  whether  the  said  BoM  will  be  the  apex  policy  setting  body  for  the  management  of these Bank, if so, the details thereof;
- (c) whether BoM is authorised to look after all administrative functions of UCBs as spelt out in the respective Co-operative Act and if so, the details thereof;
- (d) whether BoM will be responsible for credit, risk and liquidity management of UCBs and if so, the details thereof;
- (e)  whether Reserve Bank of India has come out with a scheme to allow conversion of large UCBs into small financial banks to avoid risks to the system because of their size and complexity and if so, the details thereof and if not, the reasons therefor; and
- (f) whether this move is to bring new regulatory regime in UCBs in order to bring them into the mainstream banking and if so, the details thereof?

## Answer The Minister of State in the Ministry of Finance (Shri Shiv Pratap Shukla)

- (a)  to  (d)  Reserve  Bank  of  India  (RBI)  has  intimated  that  they  have  issued  draft guidelines  on  Licensing  of  new  Urban  Cooperative  Banks  (UCBs)  on  the  lines  of recommendations  of  the  Expert  Committee  (i.e.  Malegam  Committee)  on  licensing  of new UCBs and the High Powered Committee on UCBs.

As per the draft guidelines, there shall be a Board of Management (BoM) in every UCB in addition to the Board of Directors (BoD), which shall be constituted by the BoD. Existing UCBs having  deposit  size  exceeding  Rs.100  crore  shall  put  in  place  the  BoM  within  a period of one year and other banks may constitute the BoM within a period of two years. As per the draft guidelines, BoD would be the apex policy setting body and would also look after the administrative functions of UCBs as spelt out in the respective Co-operative Act. The key responsibility of BoM will include credit management, risk management and liquidity  management.  BoM  will  also  be  implementing  sound  internal  controls  and systems/ preparation/ implementation of Risk management policy.

- (e) and (f) RBI has informed that in its monetary policy statement released on June 6, 2018  it  has  announced  to  allow  voluntary  transition  of  UCBs  meeting  the  prescribed criteria  into  Small  Finance  Banks  (SFBs).  Under  the  scheme,  well  run  UCBs  meeting certain criteria will be eligible to transit into SFBs.