The Reserve Bank of India (RBI), in consultation with the Indian Banks' Association (IBA), has constituted a consultative group chaired by A S Ganguly, director, central board, RBI, to strengthen the internal supervisory role of bank boards.
The RBI had in the mid-term review of the monetary and credit policy for 2001-02 announced on October 22 stated that it would appoint such a consultative group as "recent events had brought to the fore the need for boards of banks and financial institutions (FIs) to exercise proper vigilance and supervision over the functioning of commercial banking and other financial activities."
The central bank said that despite much greater autonomy and powers being accorded to the bank and FI boards to lay down effective internal guidelines and procedures for transparency, disclosure, risk and asset-liability management, it had come across some cases wherein the policy laid down by the boards was either flouted with impunity or the board itself had failed to frame appropriate internal guidelines for minimising risks and overlending to certain entities without adequate security.
More From This Section
"If such problems, which have surfaced recently, are to be avoided in future, within the framework of a deregulated and liberal financial system, the role of boards becomes crucial," it added.
The terms of reference of the consultative group are: to review the supervisory role of boards of banks/FIs and to obtain feedback on the functioning of the boards vis-a-vis compliance, transparency, disclosures, audit committees. Further, the group has to study the system prevalent for monitoring by the board, the implementation of policies laid down by it and also make recommendations for making the role of board of directors more to minimise risks and over-exposure.
The members of the consultative group, which has to submit its report within three months, are : J L Saha, director, IIM (Ahmedabad); Tarun Das, director, IDBI; Janki Ballabh, chairman, State Bank of India; D Satwalekar, director, HDFC Bank Ltd; S C Wadhwa, director, Dena Bank; P V Indiresan, director, Indian Bank, Shailendra Swarup, director, Corporation Bank; P R Khanna, director, SBI; S K Munjal, director, Bank of India; executive director (department of banking operations and development) and chief general manager in-charge (DBOD), who will be the member-secretary.