The Reserve Bank of India (RBI) has directed all scheduled commercial banks to take immediate action for strengthening their management information systems (MIS) and internal control mechanism.
This directive follows observation by the Joint Parliamentary Committee (JPC) on Stock Market Scam that it is imperative for the banks to follow strategies and techniques which are basic to the tenets of sound corporate governance.
The Joint Parliamentary Committee (JPC) on stock market scam, in its report had mentioned about the recommendations of Advisory Group on Banking Supervision set up by RBI under the chairmanship of MS Verma should be implemented expeditiously. This report on sound corporate governance was submitted in May 2001.
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The JPC in its report had said that it was imperative for the banks to follow strategies and techniques which are basic to the tenets of sound corporate governance.
These, included capable and experienced directors, efficient management, coherent strategy and business plan and clear lines of responsibility and accountability.
According to the guidelines of the Verma Committee, directors of banks should acquaint themselves with risk management techniques. It also said that the formation and operationalisation of risk management committee should be speeded up and their role further strengthened.
It had also said that bank boards should modify their approach towards internal controls to have a firmer say in the maintenance and improvement of internal control systems.