The Reserve Bank of India has constituted an expert committee to examine the ownership and salary structure of banks. The committee, under former Axis Bank chairman PJ Nayak, will also review the governance of boards of banks including the constitution of the boards.
According to an RBI release, the panel will analyse the representation on banks’ boards to see whether the boards have the appropriate mix of capabilities and the necessary independence to govern the institution, and to investigate possible conflicts of interest in board representation, including among owner representatives and regulators.
It will also assess and review the ‘fit and proper’ criteria for all categories of directors of banks, including tenure of directorship. The panel will also look at board compensation guidelines, and any other issue relevant to the functioning of banks’ boards and the governance they exercise.
The committee is expected to submit its report within three months from the date of its first meeting. The other members of the panel are: S Raman, whole-time member, Sebi, Shubhalakshmi Panse, CMD, Allahabad Bank, Pratip Kar, former ED, Sebi, Joydeep Sengupta, Director, McKinsey & Company, Harsh Vardhan, Partner, Bain & Co, Somasekhar Sundaresan, Partner, J Sagar Associates and Krishnamurthy Subramanian, Assistant Professor, Indian School of Business.
The committee would review the regulatory compliance requirements of banks’ boards in India and to judge what can be rationalised and where requirements need to be enhanced. It will also examine the working of the boards including whether adequate time is devoted to issues of strategy, growth, governance and risk management and review central bank regulatory guidelines on bank ownership, ownership concentration and representation in the board, the release notes.
Former RBI Governor D Subbarao had expressed concern over the government “occasionally exercising” its ownership rights in banks via channels outside their boards, and asked them to show exemplary corporate governance.
* The committee, chaired by former chairman of Axis Bank PJ Nayak, will analyse whether bank boards have the appropriate mix of capabilities and independence
* It will also assess and review the ‘fit and proper’ criteria for all categories of directors of banks
* The panel will review the regulatory compliance requirements of banks’ boards and India and to see where it needs strengthening