Page 35 - Banking Finance October 2020

ARTICLE

conflict of interest. It has also mentioned that a director Secretary for Banks and parameters relating to
should desist from voting or inducing in any theme or topic performance assessment and roles of the company
where there is a conflict or the director's independence is secretary, Responsibility of the company secretary,
affected. Secretarial Audit Applicability and Compensation of the
functionaries.
In addition, with an intention of designing crystal clear
division of responsibilities between the Board and the Will reform be effective?
management, the paper specifies that a management
At first glance, the paper is an appreciable endeavor to
functionary who is a non-promoter or major shareholder
spruce up Indian banking, particularly after the extremely
cannot be a whole-time director or chief executive officer
unpleasant developments at PMC Bank, YES Bank etc.
of a bank for over 15 consecutive years. From then on, the Nonetheless, the accomplishment of the efforts will depend
individual shall be eligible for re-appointment as WTD or CEO on the extent to which the watchdog efficiently enforces
only after the conclusion of three years.
the norms or medians.
However, during those three years period the individual shall The paper concentrates on commercial banks but a deeper
not be appointed or related with the bank in any capacity. look exhibits that only private sector banks and foreign banks
The paper restricts promoters from holding the CEO or WTD
will be the scapegoats. Public sector banks are doubtful to
position for in excess of 10 years.Once the final guidelines be squeezed and NBFCs have been left out of the ambit
are issued by the Reserve Bank, banks with WTDs or CEO
completely. Furthermore, the paper has no specific statutes
who have completed ten or fifteen years shall have two or restrictions applicable to the Government of India, who
years or up to the expiration of the current term, whichever
as a promoter holds the capacity to issue orders to such
is later, to discover and appoint an inheritor.
banks. This will definitely create ditch in the governance.
The other prescribed restrictions are maximum 70 years age Also, the RBI must know that complete obligation of
limit for CEOs and WTDs, members of the Board should not financial sector guardianship lies with it. It should not try to
be a member of any other bank or the RBI. They should not shift the responsibility to the bank boards. It is open secret
be either members of Parliament or State Legislature or that the debacle at ICICI bank, fiasco at Axis bank, farce at
Municipality or other local bodies. The strength of Board of
Indusind bank and mess at IL&FS etc. were the outcome of
directors of a bank should not be less than six and not more gross negligence of the RBI. Therefore, attempts to pass the
than fifteen. The Board should conduct meetings at least
responsibility may not help at all.
once in sixty days and at least six times a year.
In conclusion, the Central bank should be sensible and
Prior approval of the Reserve Bank of India is mandatory watchful while bumping radical changes at banks. Forceful
for appointment, re-appointment and extermination of governance standards won't clean up the banking sector.
whole-time directors and chief executive officers. If the
individual is not a proprietor of a Non-Banking Financial
Company or a full-time employee and that the NBFC does
not enjoy a financial accommodation from the bank, a
director on the board of an entity other than a bank may
be considered for appointment as director on a bank's board.

The paper places numerous procedures to guarantee
appropriate conduct of various committees of the board -
the audit committee, nomination and remuneration
committee and the risk management committee. The
central bank also counseled substantial prominence on
having a robust internal audit mechanism and vigilance
scheme. The paper advises appointment of Company

BANKING FINANCE | OCTOBER | 2020 | 35