RBI asks large UCBs to set up Board-approved policy, compliance function

September 20, 2022

The RBI has directed urban cooperative banks (UCBs) belonging to tier 3 and tier 4 categories to create a Board-approved policy and compliance function.

Key facts

The central bank has asked the urban cooperative banks with more than Rs.10,000 crore deposits (tier 4 category) to create a board-approved compliance policy and a compliance function, including the appointment of a Chief Compliance Officer (CCO), by April 1, 2023.
Tier 3 UCBs i.e., those having more than Rs.1,000 crore and up to Rs.10,000 crore deposits are given the deadline of October 1,2023.
The board approved Compliance Policy should give clear outline on the implementation of compliance philosophy, expectations on compliance culture, structure and role of the Compliance Function, the role of the CCO and the processes for the identification, assessment, monitoring, management and reporting on the compliance risk.
The framework requires the Senior Management of these UCBs to undertake Compliance Risk Assessment every year.
It also mandates the setting up of the Compliance Function, which shall ensure strict observance of all statutory and regulatory requirements for the UCBs, including standards of conduct, management of conflict of interest, fair treatment of customers and providing suitable customer service.
While the organizational structure of the Compliance Function can be chosen by the UCBs, it should be independent and well-resourced. Its operations must be regularly reviewed by an independent entity.

Who is CCO?

The Chief Compliance Officer (CCO) would head the Compliance Department. The tenure of the CCO should last for at least 3 years. He/she will directly report to the MD and CEO and/or Board or Board Committee. The CCO will have the authority to communicate with any staff member and access all records or files required to undertake the entrusted responsibilities with regards to compliance risks.

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