Letter to BS More freedom given to bank boards now, says Ravi Venkatesan

Reserve Bank of India
This is with reference to "More freedom, flexibility given to bank boards now, says Ravi Venkatesan" (July 10). I disagree that there is more freedom and flexibility for bank boards now, especially with regard to public sector banks (PSBs). There is no change in the manner of appointment of non-official directors, both government and shareholder appointees. No reforms have been undertaken to put independent professionals on these boards. Political appointees and shareholders close to the managing director or the minister of finance continue to grace PSB boards. 

No amendments in regulations has been bought to make them more accountable for decisions taken at board meetings. Government nominees (representatives of the owners of PSBs) continue to sit out of the boards’ loan sanction committees and are not held to account for decisions taken at board meetings. How can the owner not participate in deliberations relating to one of the main business of the bank, that is, lending? Reserve Bank of India (RBI) nominees continue to sit on PSB boards and their audit and loan sanction committees. 

The clear conflict of interest — in having representatives of regulator/supervisor sit on the boards of regulated/supervised entities and taking part in sanctioning loans — continues unchanged. The RBI still does not have the statutory powers to appoint and remove PSB board members and supersede these boards in case of serious irregularities. In conclusion, it can be said that in the absence of comprehensive reforms, especially those relating to governance, very little has changed in way PSB boards function.
Arun Pasricha, New Delhi

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