The Reserve Bank of India has directed the UCBs not to create any honorary positions/titles at the board level that are non-statutory in nature.
The central bank, during supervisory reviews, has observed that some of the urban co-operative banks (UCBs) have adopted the practice of creating honorary designations (remunerated or otherwise)/conferring titles at the board level, such as chairman emeritus, group chairman, and so on, which are not recognized in applicable statutes or regulations.
While such positions/titles may be indicative of certain privileges/rights for the incumbent to access all board materials and participate in board/committee meetings, enforcing liability or obligations on such person may be difficult. Such positions may be seen as creating conflicts of interest as well as the creation of a parallel or shadow authority impeding the effective and independent functioning of the legally constituted board in the best interest of all its stakeholders.
As such, UCBs are directed by RBI not to create any honorary positions/titles at the board level or confer such titles that are non-statutory and to eliminate any such existing position/titles within one year. These directions are issued under Section 35A and Section 36(1)(d) of the Banking Regulation Act, 1949 (AACS).