Sri Vijaya Puram, June 23: The Reserve Bank of India’s recent communication on director tenure in cooperative banks could have far-reaching implications for the future composition of the board of the Andaman and Nicobar State Cooperative Bank (ANSCB), with long-serving current and former directors potentially facing new restrictions on continuation and reappointment.
The RBI’s Department of Supervision has advised cooperative banks to take note of amended provisions under Section 10A(2A)(i), read with Section 56 of the Banking Regulation Act, 1949, as amended through the Banking Laws (Amendment) Act, 2025.
Under the revised framework, a director who has completed a continuous tenure of 10 years or more on the board of a cooperative bank becomes ineligible to continue in office. More significantly, the RBI has also prescribed a mandatory cooling-off period of three years before such an individual can be considered for reappointment to the board of the same bank.
The communication, issued under the subject “Directors Exceeding 10-Year Tenure in a Cooperative Bank”, has prompted cooperative banks across the country to examine the tenure of their serving directors and assess compliance with the revised governance norms.
Governance Reset Ahead
Banking sector observers said the cooling-off requirement could prove particularly significant as it closes a potential avenue through which long-serving directors could return to the board after a brief absence.
Under the RBI framework, any break in service of less than three years would not reset the tenure calculation. This means that directors who have completed the prescribed tenure cannot simply step aside temporarily and return to the board after a short interval. Only a cooling-off period of at least three years would make them eligible for reappointment.
Sources familiar with the functioning of ANSCB said the revised norms could have implications for both current and former directors who have had long associations with the bank’s board over the years. Among those whose past tenure at the bank has been substantial are former chairman Kuldeep Rai Sharma and former vice-chairman K. Subramanian.
While neither individual’s current eligibility status could be independently verified, banking experts said the amended provisions are likely to influence any future attempts by long-serving directors to return to cooperative bank boards after completing the maximum permissible tenure.
The RBI’s move forms part of a broader effort to strengthen governance standards in the cooperative banking sector through periodic board renewal, greater accountability and reduced concentration of influence among a small group of directors.
Cooperative banks occupy a unique position in India’s financial system, combining banking functions with cooperative ownership structures. Over the years, regulators have increasingly focused on improving governance practices within the sector, particularly in relation to board oversight and management accountability.
In the Andaman and Nicobar Islands, ANSCB remains one of the most important financial institutions, serving thousands of customers, cooperative societies, farmers, self-help groups and small businesses across the Union Territory. As a result, any changes affecting board composition are likely to attract considerable attention within the cooperative sector.
The RBI communication does not identify any specific bank or director. However, industry observers said it signals a clear regulatory intent to ensure periodic renewal of leadership and prevent individuals from occupying board positions indefinitely.
Officials of the Andaman and Nicobar State Cooperative Bank could not immediately be reached for comment.
With the amended provisions now in force, cooperative banks across the country are expected to review board tenures and succession plans, potentially ushering in a new phase of governance reforms and leadership transition in the sector.
