Is Corporation Bank turning a blind eye to good governance?

Is Corporation Bank’s nomination committee not paying heed to the directives on good governance issued by the Department of Financial Services (DFS)?

It does seem so, going by the bank’s move to recognise two apparently ineligible candidates — Kanwaljit Singh Oberoi and Shabeer Pasha — as ‘fit and proper’ for being appointed as shareholder directors, elections for which are slated for August 25.

In India, shareholder directors in a public sector bank are chosen in an election where the government does not vote.

In November 2007, the Reserve Bank of India had notified the ‘fit and proper’ guidelines for candidates eligible to contest. It had empowered the nomination committee in public sector banks to undertake due diligence on the candidates before declaring them ‘fit and proper’. Generally, it is the government nominee director who chairs the meetings of the nomination committee.

But granting ‘fit and proper’ status to Oberoi and Pasha has raised eyebrows, as both have overstayed as directors for more than two terms (a term is for three years) — making them ineligible for consideration as ‘fit and proper’.

According to the DFS guidelines of June 2011 and the DFS advisory of September 2013, a non-official director/shareholder director who has already served as director for six years — continuously or intermittently — cannot be considered again for nomination as director.

Oberoi has already served two terms in Syndicate Bank and Bank of Maharashtra as non-official director. He has also completed one term as shareholder director in Corporation Bank. Pasha has completed one term as non-official director in Canara Bank and resigned before he completed his second term. He has also completed one term as shareholder director in Corporation Bank.

At a time when public sector banks are under strict scrutiny for the quality of their boards, instances of the nomination committee disregarding government directives do not present a pleasant picture about the functioning of such banks, say banking industry observers.

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