As per RBI guidelines, UCB can not lend to its directos except loan against deposits. As per cooperative act only defaulter is desqualified from becoming director.
In the light of the above, can borrower become Director of UCB? If yes, what would happen to loan that is given to him before becoming director?
I C Naik
UCB directors are governed by Banking Regulation Act Section 20 is about Loans by Banking Companies. Sub Section 1 provides (1) Notwithstanding anything to the contrary contained in section 77 of the Companies Act, 1956 (1 of 1956), no banking company shall-(b) enter into any commitment for granting any loan or advance to or on behalf of-
(i) any of its Directors,
Person has to pay off the loan before being appointed as Director.