According to banking sources, the mandatory prescription is considered rather restrictive for the operations of foreign banks when the service sector is gradually opedned up under the WTO regime.
With no such requirement in activities pursued by other foreign entities, foreign bankers feel it redundant from the point of view of both cost and time effectiveness.
Local advisory boards is an RBI prescribed board which is non-executive in nature and is responsible for overseeing the compliance of various RBI norms by the foreign banks.
It is also required that all the members of local boards will be Indian. These members can neither be customers of any bank nor representatives/directors in boards of companies that are customers of the bank.
Once the RBI abolishes the local boards, it will depend on the banks whether they want to continue with the exercise. Even if any bank decides to maintain such a board, it will be entirely at their discretion to include Indian or non-Indian members on the board, sources said.
Bankers added that maintenance of the board was losing its significance as the board does not have any executive powers. As far as compliance with statutory norms are concerned, banks are getting regularly audited by external as well as internal auditors. Moreover , there is an RBI audit that takes place at regular intervals.
Besides supervising the compliance of statutory norms, these boards were also responsible for studying the nature of business in which the banks are involved in. In other words, it has to monitor whether any bank is diverting from banking business and getting into non banking activities.
