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

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.