News

RBI goes for massive governance reforms in commercial banks — Key recommendations

RBI goes for massive governance reforms in commercial banks — Key recommendations

Recently RBI released a discussion paper on ‘Governance in Commercial Banks in India’. High-profile instances involving governance failures in certain banks have called into question the adequacy of the existing legal regime for ensuring good governance in commercial banks. Internationally, the question of governance norms in banks is treated differently given the complex nature of functions performed by banks in comparison to other businesses, which make them critical for allocation of resources in the economy, protection of consumer interests and maintenance of financial stability.

The stated objective of the discussion paper is to align the current regulatory framework on bank governance with global best practices, including the guidelines issued by the Basel Committee on Banking Supervision and the Financial Stability Board. To this end, it adopts international standards for bank governance into the general corporate governance framework in India comprising the Companies Act, 2013, and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Requirements, 2015. Broadly, these governance norms focus on responsibilities of the board of directors, board structure and practices, and include aspects of risk management, internal audit, compliance, whistle-blowing, vigilance, disclosure and transparency.

Top