The central government is not in favour of allowing public sector banks (PSBs) to appoint their own independent directors, said a senior official, arguing that retaining control is essential to ensure consistent oversight and to effectively implement financial inclusion schemes.
During the PSB Manthan last month, some experts and bankers had suggested that the power to appoint independent directors should rest with the PSBs boards to enhance accountability.
"This is not feasible, and the government is not in favour of it. As the promoter, we are required to make such appointments, similar to the practice followed in private sector entities. This is also required to effectively implement financial inclusion schemes," the official said.
Already the managing directors and chairman of PSBs are being appointed by the government, the official added.
In May 2014, the P J Nayak Committee, appointed by the Reserve Bank of India to review governance of bank boards, recommended that the boards of PSBs be allowed to appoint non-official directors (NODs).Non-board directors in PSBs typically include government-nominated directors, RBI-nominated directors, independent directors, and shareholder-elected directors.
These are non-executive roles on the bank's board, and they play a key part in governance, oversight, risk management, and representing stakeholders. They are expected to bring professional expertise, ensure regulatory compliance, and provide independent judgement on bank policies and decisions. Though not involved in daily operations, their presence is crucial for maintaining transparency and accountability.
-- Harsh Kumar, Business Standard