Reserve Bank of India (RBI) Governance Oversight
The Reserve Bank of India (RBI) is intensifying its scrutiny of bank board deliberations to enhance governance practices.
Current Oversight and Actions
- SSMs (Senior Supervisory Managers) from RBI are closely reviewing:
- Board meeting agendas and the time allocated to each item.
- The observations made by independent directors and their impact.
- Discrepancies between audio recordings and board meeting minutes.
- The role and effectiveness of board sub-committees, including:
- The quality of discussions and resolutions of disagreements.
- Inputs provided by sub-committee chairpersons to the board.
- Emphasis on revisiting RBI's regulations:
- Corporate Governance.
- Governance in Commercial Banks.
Historical Context and Recommendations
- The 2015 circular eliminated the 'Calendar of Reviews' to prioritize strategic and financial importance.
- Based on P J Nayak Committee's recommendations (2014), boards focus on:
- Business strategy, financial reporting integrity, risk, compliance, customer protection, financial inclusion, human resources.
- The committee found correlations between board discussions and profitability, as well as risk-related discussions and non-performing assets.
Issues Highlighted by Former RBI Governor
- Concerns over incomplete and inaccurate information being presented to boards.
- Agenda notes often lacked comprehensive information or were not provided in advance.
- Excessive reliance on PowerPoint presentations, which limited in-depth discussions.
Key Takeaways
- RBI may soon recommend improvements in board discussions and sub-committee operations.
- Banks are encouraged to align with RBI's regulations from 2016 and 2021 for better governance.
