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The Reserve Bank of India (RBI) has requested Tier 4 Urban Cooperative Banks (UCBs) – lenders with deposits above ₹10,000 Crore – to appoint a Compliance Officer by April 1, 2023 as part of of its corporate governance standards.

The central bank has asked urban cooperative banks in the Tier 3 category – with deposits over ₹1,000 crore and up to ₹10,000 crore – to name major compliance offerings no later than October 1, 2023.

The RBI said that this circular will be presented at the next immediate board meeting for information and development of an implementation strategy, under the supervision of the board, within a limited time frame.

Tier 1 UCBs – with deposits of up to ₹100 crore – and Tier 2 – with deposits above ₹100 crore and up to ₹1,000 crore – will continue to be governed by the existing guidelines.

Under current standards, compliance is one of the primary responsibilities of directors and the board’s audit committee, and a senior executive is designated as the “head of compliance”.

UCBs falling under the Tier 3 and Tier 4 categories should treat the guidelines of the circular only as a set of minimum guidelines and define their own guidelines accordingly taking into account their corporate governance framework, the scale operations, risk profile, organizational structure and code of conduct. conduct, etc., says the banking regulator.

The RBI has also warned against “double hatting”. “The CCO will not be assigned any responsibility that brings elements of conflict of interest, in particular any business-related role,” the central bank said.

“The CCO and the compliance function have the authority to communicate with any member of staff and have access to any records or files necessary to enable them to carry out the compliance responsibilities entrusted to them”, states the RBI, adding that UCBs are free to adopt their own organizational structure for the compliance function.

However, the function must be independent and adequately resourced, its responsibilities must be clearly specified and its activities must be subject to periodic and independent review, he adds.

Compliance officers will have direct reporting lines to the chief executive and chief executive, the RBI says.

In the event that the CCO reports to the MD & CEO, the Board / Board Committee shall meet with the CCO at quarterly intervals on an individual basis, without the presence of senior management, including the MD & CEO, further indicates the RBI.

The CCO will have no reporting relationship with the verticals, he adds.

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