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.
