FILE PHOTO: FILE PHOTO: FILE PHOTO: The Reserve Bank of India (RBI) Governor Shaktikanta Das gestures as he arrives at a news conference after a monetary policy review in Mumbai, India, April 8, 2022. REUTERS/Francis Mascarenhas/File Photo/File Photo/File Photo
| Photo Credit: FRANCIS MASCARENHAS
Reserve Bank of India Governor Shaktikanta Das has asked bank directors to be more assertive and keep a sharp vigil on bank managements’ actions, particularly on actual and potential related-party transactions, and stressed that the dominance of CEOs in some banks’ board meetings is an undesirable development.
Addressing around 200 directors of private sector banks on Monday, Mr. Das stressed that there is no room for complacency despite banks’ improved financial metrics and urged them to keep depositors’ interests uppermost in their mind—a message that was also conveyed to their public-sector counterparts last week.
Despite several corporate governance guidelines issued by the banking regulator, Mr. Das said “gaps in governance” have been noticed in certain banks that have “the potential to cause some degree of volatility” in the sector. “While these gaps have been mitigated, it is necessary that Boards and the managements do not allow such gaps to creep in,” he said.
Stressing that ‘independent’ directors must be “truly independent” of the management as well as controlling shareholders, the Governor said they are expected to ask “pertinent questions” and obtain necessary information before taking decisions. “I am not advocating any confrontation, but only stressing the need for the required level of alertness,” Mr. Das said.
“At times, however, we have noticed the dominance of CEOs in Board discussions and decision making. It has been seen in such cases that Boards are not asserting themselves. We would not like this type of situation to develop,” the Governor cautioned. He, however, added a caveat that this should not lead to a situation where the CEO is “inhibited from doing his duties”.
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