What Does RBI Want To Discuss With Private Banks?

Senior bankers anticipate discussions on issues related to technology, cyber security, and customer protection.

The Reserve Bank of India has called for a meeting with the boards of private banks on November 18 in Mumbai. Another meeting with State-run banks is expected later.

The interaction will be the second of its kind with RBI Governor Shaktikanta Das, deputy governors, and executive directors from the regulation, supervision, and enforcement departments.

The maiden conference of directors of State-run and private banks was held on May 22, 2023, in New Delhi and May 29, 2023, in Mumbai.

While the agenda for the meeting has not yet been circulated, senior bankers expect the RBI to follow up on the 10 key points articulated by Das at last year's conference.

They anticipate discussions on issues related to technology, cyber security, and customer protection.

The 10 key aspects included governance and stability, requisite qualifications and expertise in the board, objective and independent board, the role of chairperson, board committees, and top executives.

Other aspects were corporate culture and value systems, quality of information, effective oversight of senior management, business model and conduct, integrity and transparency of financial statements, and independence of assurance functions: risk management, compliance, and internal audit.

In his remarks after last year's interaction, Das said the soundness of the banking system relies on effective corporate governance to build an environment of trust, long-term stability, and business integrity in banks.

Governance frameworks, he said, could be viewed as a complex mesh of nuts and bolts that hold the financial pillars of capital, assets, deposits, and investments in place, keeping the banking structure upright.

Raising financial resources would not be a constraint for banks with robust governance frameworks, as they would command a governance premium, driven by the quality of leadership at the top.

Ahead of last year's meeting, the move was seen as a first step following Finance Minister Nirmala Sitharaman's Union Budget FY24 announcement on the need to improve governance and investor protection in the banking sector.

In the FY24 Budget, Sitharaman proposed certain amendments to the Reserve Bank of India Act (1934), the Banking Regulation Act (1949), and the Banking Companies (Acquisition and Transfer of Undertakings) Act (1970).

The upcoming meeting is 'expected to finetune' the issues raised in Mint Road's Discussion Paper on Governance in Commercial Banks in India, released on June 11, 2020.

The objective of the paper was 'to align the current regulatory framework with global best practices while being mindful of the context of the domestic financial system'.

Feature Presentation: Aslam Hunani/Rediff.com