Following are the sections under Banking Regulation Act,1949 which relates to appointment of Chairman, Managing Director and Whole Time Director and which are made applicable to Co-operative Banks including UCBs.
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
In terms of powers conferred under these various sections, RBI has issued direction relating to appointment of Managing Directors/Whole Time Director (MD/WTD)
Para 3.2 of the direction relating to appointment of MD/WTD dated 25th June 2021 reads as follows
If a UCB decides to appoint Whole-Time Director (WTD), who may also be designated as Executive Director or by any other name, the need for such an appointment may be decided by the bank keeping in view the growth in business, expansion of activities, geographical footprints and organisational vision for growth in the medium and long term. The creation of the post of WTD and the functions that can be performed may be decided by the BoD and approved by the General Body of the bank. The WTD shall report to the Managing Director.
Since the concept of whole time director is new to UCBs,there appears to be some doubts as to whether UCBs should appoint WTDs.For a better understanding of the concept of WTDs the structure of appointment of senior functionaries in commercial banks need to be studied.
In all commercial banks there exists the full time Chairman, full time Managing Director and full time Whole Time Director. The Chairman is the head of Board ,Managing Director is the head of the administration and Whole Time Director is another senior functionary who will report to the Managing Director. In other words he is subordinate to Managing Director.
In commercial banks because of the huge responsibility bestowed on the senior functionaries this set up is required. But in respect of UCBs may be in big scheduled urban co-operative banks the appointment of whole time director many be necessary.
In UCBs the Board is an elected body headed by a elected Chairman/President. Hence the question of appointment of whole time chairman does not arise at this point of time. The need for appointment of whole time director in non scheduled UCBs also may not arise.