RBI’s 10-year tenure cap for co-operative bank directors ignored in Gujarat, say critics

The Reserve Bank of India (RBI) bars any director from serving in a co-operative bank for more than 10 years. The rule, introduced to promote transparency, was initially set at eight years before the central government extended it to 10 years through a gazette notification in August 2025.

In Gujarat, however, the regulation remains largely unenforced. Despite the legal limit, many directors continue to hold office for decades. Critics allege that the ruling Bharatiya Janata Party (BJP), which maintains significant influence over the state’s co-operative banks, has benefited from the lax enforcement.

Hundreds continue beyond legal term

The RBI has said that regular leadership changes help maintain accountability, reduce the risk of vested interests, and ensure co-operative banks remain responsive to the needs of their members. Governance experts argue that such limits also encourage diversity in leadership, bringing in fresh perspectives from different sectors and communities.

Yet, data presented in the Rajya Sabha shows that in 16 district and taluka co-operative banks, 169 directors have stayed on past the eight-year limit. 

Banking sector observers note that the figures in Gujarat are among the highest in the country, underscoring the scale of non-compliance. Despite repeated reminders from regulators, no large-scale removals or restructuring of boards have been reported in recent years.

In 145 urban co-operative banks across districts including Gir Somnath, Palanpur, Ahmedabad, Valsad, Bhavnagar, Kutch, Surat, Nadiad, Amreli, Rajkot, Junagadh, Jamnagar, Sabarkantha, Navsari and Panchmahal, 876 directors remain in office beyond the permitted tenure.

The RBI’s rules apply uniformly across India, but their implementation varies from state to state. Observers note that Gujarat has yet to see any large-scale enforcement drive to remove over-tenured directors.

Political links questioned

Rajya Sabha MP Shaktisinh Gohil alleged that “most of these directors are linked to the BJP” and claimed that strict enforcement of the rule would see several party leaders lose their positions. This, he argued, explains the lack of action despite the RBI’s and the government’s directives.

Some within the BJP are also said to favour enforcing the tenure limit, seeing it as a way to break the decades-long dominance of entrenched directors and create opportunities for younger leaders.