The great Indian bank facelift finally begins

NEW DELHI: The government will soon initiate the next series of corporate governance reforms at state-run lenders, including a more diversified board structure, stronger board-level committees and a robust performance management system for employees.A finance ministry official aware of the deliberations said the aim is to put in place a standard operating environment on governance in public sector banks (PSBs) in alignment with the Companies Act wherever required.“There have been some suggestions made by the Banks Board Bureau (BBB). We are also in discussion with the Reserve Bank of India (RBI) to adopt best practices from both private banks and global financial institutions,” the official said, adding PSBs have been directed to strengthen internal controls and risk-management practices. “We need a system which should also remunerate non-revenue generating functions’ staff,” he said.Among key proposals made by the BBB and being actively considered are further professionalising the boards of PSBs and bringing in experts in risk management, information technology and human resource management. 67631857 “One of the suggestions is to reconstitute the management committee of the board which takes decisions on large value loans,” the official said. “Then we are also looking to strengthen the risk-management committee, which should be given a mandate to set a definite matrix for various credit underwriting activities.” Another proposal is to firewall the audit committee of the board so that full-time directors are not a part of it.In its recommendations, the BBB has also suggested that a nomination and remuneration committee (NRC) should be set up in banks, along the lines suggested by the Companies Act, 2013.Under its reforms agenda for state-run lenders termed EASE — Enhanced Access and Service Excellence — the government had directed PSBs to draw up a board-approved strategic vision consistent with their risk-appetite framework.Lenders were also told to develop more focussed performancemanagement systems (PMS) to incentivise and fast-track the promotion of top performers.Earlier this month, RBI governor Shaktikanta Das had said the government, the BBB and the central bank are engaged in developing an objective framework for performance evaluation and this should redefine the contours of corporate governance in PSBs with a focus on transparency, accountability and skills.

from Economic Times http://bit.ly/2FPfgMK