The direction dated 25th june 2021 issued by RBI regarding appointment/reappointment/termination of appointment of Managing Director/Whole time director is the sum total of all provisions contained in section 10,10B,10BB, 35A,35B and 36AA and 53A of banking regulation Act,1949. In other words the various provisions relating to MDs have been summarised and direction issued.
Section10. Prohibition of employment of Managing Agents and restrictions on certain forms of employment
Section 10B. Co-operative Bank to be managed by whole time Chairman
Section 10BB. Power of Reserve Bank to appoint Chairman of the Board of Directors appointed on a whole-time basis or a Managing Director of a co-operative bank
Section 35B – Amendments of provisions relating to appointments of Managing Directors, etc., to be subject to previous approval of the Reserve Bank
Section 36AA. Power of Reserve Bank to remove managerial and other persons from office
Section 53A. Powers to exempt co-operative banks in certain cases.
Earlier to issue of this direction, CEOs in UCBs were being appointed as per the provisions of section 29G of KCS Act,1959. CEOs of all UCBs were familiar with the powers and duties delegated under section 29G.
To have a better understanding of the above various provisions it is necessary to understand the organisational set up of top managements in commercial banks. In these banks there exists a whole time chairman, managing director and a whole time director. Keeping this setup in mind the above sections have been inserted into Banking Regulation Act,1949.
In Urban Co-operative Banks there exists and elected board of directors headed by office bearers namely chairman and vice chairman. Hence there is no question of a whole time chairman being appointed. Only the managing director is being appointed. Until RBI comes out with guidelines regarding duties ,powers and responsibilities of MD/WTD the CEOs have no option but to continue with the present legacy systems.