Discussion Paper on ‘Governance in Commercial Banks in India’ released by RBI

  • IASbaba
  • June 16, 2020
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Discussion Paper on ‘Governance in Commercial Banks in India’ released by RBI

Part of: GS-Prelims and GS-III – Economy; Banking system

In News:

  • The RBI released a Discussion Paper on ‘Governance in Commercial Banks in India’ for public comments.

Key takeaways 

  • The objective of the discussion paper is to align the current regulatory framework with global best practices while being mindful of the context of the domestic financial system.
  • Based on the feedback, fresh guidelines will be issued. 
  • The new norms will come into effect within six months after being placed on the RBI’s website or April 1, 2021, whichever is later.
  • The norms will be applicable to private, foreign and public sector banks.
  • Some of the major highlights of the paper are as follows:
    • Board members should not be a member of any other bank’s board or the RBI. 
    • They should not be either a Member of Parliament or State Legislature or Municipality or other local bodies.
    • Board of directors of a bank should not be less than six and not more than 15, with a majority being independent directors.
    • The board shall meet at least six times a year and at least once every 60 days.
    • A director on the board of an entity other than a bank may be considered for appointment as director on a bank’s board, if the person is not an owner of an NBFC or a full-time employee and that the NBFC does not enjoy a financial accommodation from the bank.
    • Appointment, re-appointment and termination of wholetime directors (WTDs) and chief executive officers (CEOs) should be with the previous approval of RBI.
    • The upper age limit for CEO and WTDs of banks is suggested at 70 years. 
    • Banks will be free to set a lower age for such appointments.

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