The consultative group of directors of banks and financial institutions (FIs,) set up by Reserve Bank of India to review the supervisory role of boards, has asked public sector banks (PSBs) to consider appointing qualified company secretary (CS) as secretary to the board.
The recommendation is in view of the fact that the CS is the nodal point for the board to get feedback on the status of compliance by the organisation in regard to provisions of the company law, listing agreements, Sebi regulations, shareholder grievances among others.
The group has also called for the appointment of a compliance officer (reporting to the CS) in PSBs for ensuring compliance with various regulatory/accounting standards.
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The boards of private banks, while nominating or co-opting directors, should be guided by certain broad 'fit and proper' norms such as formal qualification, experience, track record, integrity.
Further like in the case of nomination of directors to the boards of PSBs, a director of a private bank should not be a people's representative.
In respect all banks, a strong corporate board should fulfil the four major roles of overseeing the risk profile of the bank; monitoring the integrity of its business and control mechanisms; ensuring the expert management; and maximising interests of its stakeholders, the group said.
The group observed that independent/non-executive directors have a prominent role in inducting and sustaining a pro-active governance framework in banks. Further, it felt that it would be desirable for banks to take an undertaking from each independent and non-executive director to the effect that he/she he/she has gone through the guidelines defining the role and responsibilities and enter into a convenant to discharge his/her responsibilities to the best of their abilities, individually and collectively.
The role and responsibilities of the supervisory committee as envisaged by the group viz., monitoring of the exposures (both credit and investment) of the bank, review of the adequacy of the risk management process and upgradation thereof, internal control system, ensuring compliance with the statutory / regulatory framework, may be assigned to the management committee/ executive committee of the board.