RBI mandates Chief Compliance Officer for Tier 3 and 4 Urban Cooperative Banks

Tags: Economy/Finance

The Reserve Bank of India (RBI) on 19 September 2022 mandated the Tier 3 and 4 Urban Cooperative Banks (UCB) to appoint chief compliance officers to supervise compliance risk in the bank.


What is a Compliance Risk ? 

  • According to the RBI, Compliance risk is the risk of legal or regulatory sanctions, material financial loss or loss of reputation a UCB may suffer, as a result of its failure to comply with laws, regulations, rules, and codes of conduct, etc., applicable to its activities. 

Tenure of Compliance Officer :

  • According to the RBI the minimum tenure of the chief compliance officer shall be 3 years.

Timeline for the Urban Cooperative banks to appoint compliance officer :

  • ·The tier-4 Urban Cooperative Bank (UCBs) have to appoint a chief compliance officer by April 1, 2023. Tier-4 UCB are banks with a deposit of more than Rs 10,000 crores.
  • The tier -3 UCB has to appoint chief compliance officer latest by October 1, 2023.Tier-3 UCB are banks with a deposit of more than Rs 1,000 crores and less than Rs 10,000 crores.
  • The tier-1 and tier-2 UCB will continue to be governed under the existing guidelines.
  • Tier-2 UCB are banks with a deposit of more than Rs 1, 00 crores and less than Rs 1,000 crores.
  • ·Tier-1 UCB are banks with a deposit upto Rs 100 crores. 

What is a Primary Urban Co-operative Bank ? 

  • Primary Co-operative Banks, popularly known as Urban Cooperative Banks (UCBs) are registered as cooperative societies under the provisions of, either the State Cooperative Societies Act of the State concerned under the provisions of the or the Multi State Cooperative Societies Act, 2002. 

Who regulates the UCB ? 

  • There is a duality of control over the UCB. It is regulated by the Registrar of Cooperatives and also by the RBI. 
  • One agency regulates them for being cooperatives and another regulates its banking function.

Cooperative functions Regulator :

  • If they have been set up under the state cooperative law then they will be regulated and supervised by the Registrar of Cooperative Societies (RCS) of the concerned State.
  • If the UCB has been registered under the Multi State Cooperative Societies Act, 2002, then they are regulated by the Central Registrar of Cooperative Societies (CRCS), Government of India. 

Regulation of banking function :

  • The Banking Regulation Act 1949 was made applicable on these banks from 1 March, 1966.
  • The Reserve Bank regulates and supervises the banking functions of UCBs under the provisions of Banking Regulation Act, 1949.

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