Financial Daily from THE HINDU group of publications
Sunday, Jun 27, 2004
Financial Daily from THE HINDU group of publications Sunday, Jun 27, 2004 |
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RBI & Other Central Banks Money & Banking - Private Banks RBI tightens norms for private bank directors' appointments Our Bureau
Mumbai , June 26 THE Reserve Bank of India has tightened norms for appointment of directors on the boards of private sector banks through a process of internal checks and balances. In a circular addressed to the CMDs and CEOs of private sector banks, RBI has stated that private banks should undertake due diligence to determine the suitability of the person for appointment/continuing to hold appointment as a director on the board. The due diligence must be based on qualification, expertise, track record, integrity and other `fit and proper' criteria. Banks should obtain necessary information and declaration from the proposed/existing directors for the purpose. RBI has asked the boards of the banks to constitute a nomination committee to scrutinise the declarations. It has also directed that due diligence should be undertaken by the banks at the time of appointment and renewal of appointment. Banks also have to obtain annually on March 31, a simple declaration that the information already provided has not undergone change, and if there is any change, requisite details are furnished by the directors. The information includes the list of entities or banks that the director has interest in, details of any proceedings or prosecution against him/her and whether the director, at any time, came to the adverse notice of a regulator, such as SEBI, IRDA, DCA. The Dr Ganguly Group report had recommended that banks should require the directors to execute a covenant binding them to discharge their responsibilities to the best of their abilities, individually and collectively. The report had also recommended that due diligence of directors should be done based on their suitability for the post keeping in mind their qualifications, technical expertise, track record and integrity.
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