Financial Daily from THE HINDU group of publications
Friday, Jun 21, 2002
Financial Daily from THE HINDU group of publications Friday, Jun 21, 2002 |
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Money & Banking
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RBI & Other Central Banks Regular disclosures to boards by banks mooted Our Bureau
MUMBAI, June 20 THE RBI has asked banks to adopt the recommendations of the consultative group on appointment of directors on their boards. The report of the group, (Dr Ganguly Group) which was submitted to the RBI in April, suggested that banks must make disclosures to their boards at regular intervals. They must detail the board on exposures to related entities with respect to the lending and investment in subsidiaries and the asset classification of such lending and investment. In a list of recommendations made to the RBI after reviewing the supervisory role of boards, public sector banks have been advised that in order to improve information flow, board-room proceedings must be recorded. To this end, a summary of key observations made by the directors can be submitted in the next board meeting. Banks should also consider appointing a qualified company secretary as the secretary to the board and have a compliance officer (reporting to the secretary to ensure compliance with various regulatory and accounting requirements.) Private sector banks have been asked to evolve appropriate systems for ensuring fit and proper norms for directors, which may include calling for information by way of self-declaration, verification reports from market etc. In case a director on board of an NBFC is to be considered for appointment as director on the board of a bank conditions apply like the candidate must not be the owner of the NBFC (shareholdings single or jointly with relatives, associates, etc should not exceed 50 per cent). The Ganguly Group suggested that composition of the board must be commensurate with the business needs of the banks. Efforts should be aimed at bringing about a regulation-based representation of sectors like agriculture, SSI, co-operation etc. Banks which have been publicly listed have been asked to form a committee under the chairmanship of a non-executive director to look into redress of shareholder complaints. The formation and operationalisation of a risk management committee should be speeded up and their role further strengthened. The role and responsibilities of the supervisory committee in terms of monitoring of credit and investment exposures, reviewing adequacy of the risk management process and upgradation thereof etc, may be assigned to the management or executive committees of the board, according to the recommendation. Banks and financial institutions must have a strong corporate board that oversees the risk profile of the bank, monitors the integrity of its business and controls mechanisms, ensures expert management and maximizes interests of stakeholders. Need-based training programmes, seminars and workshops may be designed by banks to acquaint their directors with emerging developments and challenges facing the sector.
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