RBI Governor Shaktikanta Das Says Governance Gaps Found In Some Banks

RBI Governor Shaktikanta Das on Monday said the Reserve Bank of India has found some gaps in governance at certain banks, and these gaps have the potential to cause some degree of volatility in the banking sector.

“While these gaps have been mitigated, it is necessary that Boards and the managements do not allow such gaps to creep in,” Das said during a speech, according to an ET report.

The RBI governor, according to the report, said it is of utmost importance that the directors “keep themselves updated with material changes in the bank’s internal environment as well as the external factors that have a bearing on the bank”.

Das has also advised CEOs of banks to speak to the media to dispel misinformation on social media, he said.

“In this digital age, it took only a few hours to transfer billions of dollars held as deposits in a bank to other institutions, leading to a severe liquidity crisis… We had to advise the CEOs to interact with the media immediately to set out the facts correctly. There have been instances when the Reserve Bank had to issue press statements to assuage concerns and prevent potential panic,” he said, according to Business Standard.

The RBI governor made the comments in a speech to board members of public sector banks on May 22 in Delhi and to private bank boards on May 29 in Mumbai.

On the banks’ business model, he said, “Overaggressive growth, under-pricing or over-pricing of products both on the credit and deposit sides, concentration or lack of adequate diversification in deposit/credit profile can expose the banks to higher risks and vulnerabilities.”

Das added that it is, however, a matter of concern that despite these guidelines on corporate governance, we have come across gaps in governance of certain banks, with the potential to cause some degree of volatility in the banking sector, he said.