Business Standard

Ministry officials to exit bank committees

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Shriya Bubna Mumbai
The Centre has decided to withdraw finance ministry officials from the management committees of public sector banks. The government, however, has allowed the Reserve Bank of India (RBI) nominees on the banks' board to be part of the committees.
 
The management committees are more involved in the banks' daily operational affairs such as making decisions on lending and deposit interest rates, approving large loans and major investments.
 
In February, the government had withdrawn both government- and the RBI-nominated directors from management committees to pave way for greater managerial autonomy for banks to conduct their business.
 
The RBI had then decided to withdraw all its serving officials from the boards of the banks and, subsequently, replaced them with the retired RBI officials.
 
However, in a notification on June 29, 2007, the government amended the Nationalised Banks (management and miscellaneous provisions) Scheme, which governs the constitution of the management committees, barring only government nominees from the committees.
 
Last month, following differences with independent directors nominated by the government on its board, the Punjab and Sindh Bank Chairman RP Singh had written to the central bank and the finance ministry to reinstate their nominees on managing committees of the bank's board.
 
A senior banker said in the absence of the RBI and the government nominees on the management committees of public sector banks that the "politician" directors (appointed by the government as independent directors) had a "field day" at meetings that were called for taking crucial decisions.
 
In a letter to the RBI governor, Singh said, "When we do not have any professionally qualified directors on the board, the removal of the RBI/GoI nominees from the management committee has proved to be counter productive. In any case, since the RBI has chosen to replace the serving officers with retired officers as nominee directors, there may not be any justification any more to exclude the RBI nominee director from the managing committee."
 
While the board of a large public sector bank has 16 directors, only 6-7 of these directors form part of the managing committee of the board. The board is the policy making body of the bank and meets once in a month. The managing committee, however, convenes at least once a month depending on the business on its agenda.

 
 

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First Published: Aug 03 2007 | 12:00 AM IST

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