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Informist, Monday, May 25, 2026

 

--RBI OKs final norms on cooling-off period for co-operative bks' directors 

 

NEW DELHI – The Reserve Bank of India Monday mandated a minimum cooling-off period of three years to reappoint a director who has completed a continuous tenure of 10 years on the board of a state or central co-operative bank. "During the cooling-off period, the said director shall not be associated with the UCB (urban co-operative bank) in any capacity/manner other than as a member/customer," the central bank said. "This, however, shall not preclude him/her from being appointed as a director on the board of another bank."

 

The Banking Regulation Act, 1949, which empowers the RBI to regulate and supervise all banking companies, stipulates a maximum continuous tenure of 10 years for directors of co-operative banks. "Reserve Bank of India has observed instances where this requirement was sought to be bypassed through brief resignations or brief interruptions between two directorships followed by re-election or co-option to the Board of Directors," the banking regulator said. "Such practices undermine the intent and spirit of the law."

 

Stakeholders had told RBI in their feedback that the cooling-off period must be increased to five years to make it consistent for boards across the banking sector. Rejecting the view, the RBI said the three-year prescribed cooling-off period is the minimum requirement. "Banks may choose to follow a longer cooling-off period that aligns with the term of their board," it said. "Notably, the term of the Board in some co-operative banks is three years."

 

While draft directions permit individuals to serve as directors at other banks during their cooling-off period, the central bank also received feedback that some co-operative laws prohibit them from holding membership in more than one co-operative society simultaneously. Accepting the issue, the RBI said "a person may serve as a director on the board of another bank during the cooling-off period if otherwise eligible".  End

 

Reported by Priyasmita Dutta

Edited by Rajeev Pai

 

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