The recent statements of RBI Governor Shaktikanta Das at the Conference of the Directors of Banks have set the perfect tone for a governance framework for banks. The sheer breadth of the issues covered — sharp accounting practices, innovative evergreening methods, risk management practices, quality of agenda notes — reflect the problems on the ground.

With the clean-up of bank NPAs (non-performing assets) almost over, the focus of the message is on learning from past mistakes and having the right systems in place to prevent the reoccurrence of such issues. The Governor made a pointed reference to board presentations, stating: “Power point presentations are being circulated as agenda notes and these presentations are like a guided tour and directors should clearly look beyond a guided tour.”

This statement, which has substantive and rich overtones, is worthy of serious discussion.

The success of any board meeting rests on setting the right agenda items and, more importantly, circulating them well in advance. Segregation of items which are routine and regulatory and ones which are strategic and business oriented is a must to ensure focused and relevant discussions.

What has come as a wake-up call is the Governor stating that board presentations are like “guided tours”. One hopes that the unsaid part is not — ‘it is a tour with an unclear destination’. A typical board meeting has a set of packed agenda items. There are various presentations made covering a wide array of subjects. Sometimes figures and statistics have a tendency to hide and mask some cold realities which can be unearthed only by free and frank discussions at the meeting.

Minutes of meeting

The board ecosystem should provide adequate time to facilitate that. Since recently, there is the practice of recording in the minutes of the meeting “who said what “. It also serves as a basis for evaluating the contribution of the directors at the meeting. While this no doubt is a welcome trend, it has the potential to convert ‘minutes’ to research documents.

While the format of board presentations varies from company to company or bank of bank, it may also be possible to template and standardise some parts of the same to ensure uniformity and best practices. The call that directors should look beyond the “guided tour” emphasises the need for adequate preparation before the meeting. Only then the right set of questions can be raised at the right time.

Alongside that, it should the the bounden duty of the directors to not just raise issues but also provide the right and contextual set of solutions.

Issues relating to provisioning of NPAs and matters relating to internal audit and internal control, even if adequately captured in PPTs, are now being discussed at board meetings with directors not forming part of relevant committees chipping in when their points of view and sharing their experience. A collaborative and a constructive role in the discussions around the “guided tour” is the expectation and not a confrontationist role, which serves nobody’s interest.

Independent directors

The loaded statement of the RBI Governor around the “guided tour” could not have come at a more appropriate time. This is applicable probably not only for banks but across all companies. As we near the completion of almost a decade of the legislation relating to independent directors, a discussion on this subject is bound to trigger some serious soul searching on the quality and content of power point presentations at board meetings.

It should be the endeavour of all stakeholders to ensure that “guided tours” lead to the right destination which is — best in class governance standards across industries and companies. As the saying goes, the quest for excellence has no finish line. It is a journey by itself.

The writer is a chartered accountant

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