RBI raises dominance by few on bank boards
Sandeep Dikshit
New Delhi, September 25
RBI Governor Shaktikanta Das on Monday said there had been “excessive dominance” by one or two board members even in “big commercial banks” and asked the regulated entities (REs) to desist from such practices.
Not comfortable with NPAs
- Shaktikanta Das says RBI “not comfortable” with the gross non-performing assets ratio of 8.7% in UCBs
- Asks them to work towards improving it by raising governance standards and focusing on credit risks
Board discussions have to be free, fair and democratic, Das said, addressing directors of urban cooperative banks (UCBs) at a meeting organised by the RBI. “There should not be an over-dominance or excessive dominance by one or two members of the board, or the chairman or the vice-chairman. We have seen this even in big commercial banks… wherever we have seen this, we have told the bank that this is not the way,” he said. Das said all directors needed to be given a chance to speak and a particular director’s say should not be the final one on a matter. Das did not elaborate but in the case of Yes Bank, it was found that one of the reasons for its crash was that many decisions were pushed through by its larger-than-life founder Rana Kapoor, who was later arrested for alleged financial irregularities.
The RBI chief was also unsparing towards the UCBs and said their directors should have expertise in various aspects of banking, such as risk management and IT. They should also attend board meetings after preparing themselves. Das said the RBI was “not comfortable” with the gross non-performing assets ratio of 8.7% in the UCBs and asked them to work towards improving it by improving governance standards, avoiding related-party transactions and focusing on credit risks. He underlined the shaky position by stating that even on the capital adequacy front, the situation was “not at all satisfactory”.
