The Reserve Bank of India (RBI) and the Ministry of Cooperation have decided to remove individuals occupying key positions such as directors, chairmen, and managing directors from the boards of cooperative banks. This decision, applicable to all cooperative sectors and banks, including Gujarat, is set to be implemented soon, keeping up with the Cooperative Banking Regulation Act.
In their inspection report, the Reserve Bank has emphasised that individuals who have served in such positions for more than eight years must be relieved. It’s deemed a futuristic move to usher in a generation of new leaders in the cooperative sector, and a significant decision ahead of the elections.
According to Section 10(2)(a) of the Banking Regulation Act, no one can hold the position of director or chairman in a bank for more than eight consecutive years. After completing eight years, the person concerned will be ineligible for any such position for the next four years.
Thus, the applications of candidates seeking positions on the board of the Sabarkantha District Central Cooperative Bank have been rejected owing to the completion of their tenure. This ruling has also resulted in the removal of members who have served eight years at the Junagadh Commercial Cooperative Bank, Nawanagar Cooperative Bank, Mehsana Nagarik Sahakari Bank, and Kalupur Cooperative Bank.
The decision has been met with strong opposition from the Ministry of Cooperation. The Gujarat Cooperative Bank Federation has lodged a complaint with the central government. Jyotindra Mehta, the federation’s chairman, has argued that the decision contradicts the provisions outlined in the Banking Act.
Mehta has cited Article 97, which allows directors to continue serving in their positions for an additional five years beyond their tenure. A resolution is expected in the coming months.