Banks urge RBI for boards' workload mgmt, flag cyber security concerns

Cybersecurity risks, customer centricity issues flagged

Private sector bank board members have urged the Reserve Bank of India (RBI) top brass to consider workload management of the boards as they feel there are too many issues that go to the boards for approval and the situation becomes unmanageable at times.

 

The views were conveyed to the regulator on Monday in a conference of directors of private sector bank boards on the theme “Transformative Governance Through Sound Boards”. RBI governor Shaktikanta Das, deputy governors Swaminathan J and M Rajeshwar Rao, and other senior officials of the central bank participated in the conference.

 

“There is a need to revisit agendas that are presented to the board… it is becoming unmanageable as too many things go to the board for its approval,” said a private sector bank board member, who attended the conference, on the condition of anonymity. 

   

“We need to see if some of these agendas can be delegated down the line,” the person added.

 

The regulator has put the onus on the banks’ boards for maintaining a robust governance structure. In his speech, governor Das emphasised on the need for the boards to adopt a proactive approach in identifying and addressing potential challenges.

 

Last year, the regulator mandated at least two whole-time directors each on the boards of private banks, including small finance banks. Most of the private banks have complied with the norm.

 

According to bankers who attended the meeting, cybersecurity remains a big concern for the regulator. The RBI has asked the banks to allocate sufficient resources for cybersecurity-related issues. “The regulator has emphasised on outsourced entities and the need for banks to keep a check on such entities, so that they do not become a source of risks,” another banker said.

 

The conference had participation of over 200 directors of private sector banks, including chairmen and managing directors (CMDs) & chief executive officers (CEOs), the RBI said in a release.

 

On the issue of expected credit loss framework, bankers said the RBI indicated that draft norms on this will be out soon and based on the feedback, final guidelines will be released. In January 2023, a discussion paper on the issue was floated and then in October last year an external working group (WG) was formed, which aimed to obtain independent insights into the intricate details of the issue.

 

The regulator also sensitised the bank boards on addressing customer grievances.

 

“It is disheartening to see the nature of some of the complaints and the observations in our inspection reports. There are instances where complaints are misclassified as customer queries. We also come across instances of rejected grievances not being escalated to the internal ombudsman of banks,” Das said while urging the boards and their customer service committees to closely look into these aspects to ensure that banks have a genuine commitment to customer centricity.

 

In this context, the regulator also highlighted the importance of updating know your customer (KYC) norms periodically. The RBI has asked the banks that they should reach out to customers proactively, and that freezing bank accounts due to (KYC) not being updated is not an option.

 

RBI officials also raised the issue of employee attrition in critical functions like information technology and treasury operations. While noting that the issue of attrition was addressed to some extent as compared to last year, they said attrition in critical functions can weaken the fundamentals of banks.