Reserve Bank proposes to shore up bank boards

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News: The Reserve Bank of India(RBI) has issued a discussion paper on ‘Governance in Commercial Banks’.The discussion paper aims to create a clearly definable separation between the board and the management of a bank.

Facts:

  • Guidelines Coverage: The guidelines are applicable to private, foreign and public sector banks.
  • It will come into effect within six months after being placed on the RBI’s website or April 1,2021 whichever is later.

Key Guidelines issued:

  • Board Members should not be a member of any other bank’s board or the RBI and should not be either a Member of Parliament or State Legislature or Municipality or other local bodies.
  • Board of directors of a bank should not be less than six and not more than 15 with a majority being independent directors.The Chairman of the Board should be an independent director.
  • Board shall meet at least six times a year and at least once every 60 days.
  • Approval of RBI: Appointment, re­appointment and termination of whole-time directors (WTDs) and chief executive officers(CEO) should be with the previous approval of RBI.
  • Age Limit: The upper age limit for CEO and WTDs of banks is suggested at 70 years which is a norm for private banks at present.
  • Reappointment: The person can be re-appointed only after three years, the period in which there should be no association with the bank in any capacity.