The Hindu Business Line : Clause 49 compliance not a bother for PSBs

WHILE many public sector undertakings are said to be struggling to comply with the board composition requirements under revised Clause 49 of the listing agreement, an important segment of listed state-owned entities — the public sector banks — find themselves cosily placed in adhering to the norms as the D-day nears.

Under revised Clause-49, which will come into force from January 1, the board of directors of listed entities would be required to have at least 50 per cent of independent directors.

Officials of the Finance Ministry said that PSU banks would have no problems in complying with the board composition norms. "We do not see any problem in PSU banks complying with the requirements of Clause 49," senior Finance Ministry officials said.

Top officials of PSU banks said the current laws provide for adequate number of `independent' directors that would enable them to comply with the requirements of the Securities Exchange Board of India (SEBI). "Most bank boards should be compliant with the norm," the Chairman and Managing Director of a PSU bank said.

They pointed out that with provision of up to six directors being elected by shareholders, the board of PSU banks would have a fair share of independent directors among the maximum strength of 13 members.

Besides, the Chairman-cum-Managing Director, the Executive Director and a maximum of six shareholder directors, banks' boards have the provision for a Government nominee, a nominee from the Reserve Bank of India, a chartered accountant, and one director each representing the officers and the workmen of the bank

They said among the lot of 13 directors, only five should be considered as `non-independent'. These include the CMD, ED, the Government nominee and the two directors representing the officers and the employees.

Incidentally, the Government recently mooted amendments to restrict the number of directors representing public shareholders to a maximum of three (from the current six) while the other three shareholders' directors are to be appointed by the Government.

Officials and bankers feel that whichever way one looks at it (whether the current laws or the law after the proposed amendment goes through), PSU banks would be on the right side of the regulations.

While there is no anxiety among PSU banks, PSUs in other sectors such as oil companies are said to be struggling to comply with the norms in the wake of inadequate representation of independent directors caused by a heavy presence of company officials and Government nominees on the boards.

Though pressures are building on SEBI to extend the January 1 deadline, the capital market regulator till now has held that there would be no further relaxation given to companies.