Appointment for post of MD/ WTD in UCB

Appointment for post of MD/ WTD in UCB

Subject: Economy

Context: After a ruling by the Gujarat High Court in 2013, which was upheld by the Supreme Court in 2021, the Madhya Pradesh High Court has stayed the implementation of RBI’s notification.

Concept:

• As per RBI data on May 31, there are 1,531 UCBs in the country — 53 scheduled and 1,478 non-scheduled.
• The Banking Regulation (Amendment) Act was meant to provide additional power to the central bank for effectively regulating co-operative banks.
• For the Eligibility criteria of holding the post of MD/ WTD, the RBI debarred persons such as Member of Parliament or State Legislature or Municipal Corporation or Municipality or other local bodies , persons engaged in any other business or vocation, director of a company (except non-profit one), a partner of any firm which carries on any trade, business or industry, having substantial interest in any company or working as director, manager, managing agent, partner or proprietor of any trading, commercial or industrial concern will not be eligible
• The tenure of the posts will not be for more than five years at a time, subject to a minimum period of three years at the time of first appointment, unless terminated or removed earlier.
• He/she will be eligible for re-appointment. The performance of MD/WTD shall be reviewed by the board annually. Also, the post cannot be held by the same incumbent for more than 15 years. However, after a cooling period of three years, reappointment is possible.

Issues

• The co-operative is part of the State List in the Seventh Schedule of the Constitution while banking is a part of the Union.
• The power to legislate co-operative societies falls exclusively with the State and not within the domain of the Union, much less the RBI.
• The 97th Constitution Amendment (2011) provided that in case of a co-operative society carrying on the business of banking, the provisions of the Banking Regulation Act 1949 will apply.