Bank directors must furnish info on adverse strictures passed by financial sector regulators against them

In an effort to improve due diligence, the Reserve Bank of India (RBI) on Monday asked banks to seek information from their directors on any adverse strictures passed by financial sector regulators against them. The banking regulator has partially modified the format of ‘Declaration and Undertaking’ prescribed for the purpose of conducting due diligence to determine the ‘fit and proper’ status of directors. Banks should get information whether the director at any time come to the adverse notice of a regulator such as the Securities and Exchange Board of India and the Insurance and Regulatory Development Authority.

Henceforth, banks should obtain declaration and undertaking from existing directors and also persons to be appointed or elected as director.

It is not necessary for a candidate to mention about orders and findings by regulators which have been later on reversed or set aside in toto.

But they would have to make a mention of the same, in case the reversal and setting aside is on technical reasons like limitation or lack of jurisdiction and not on merit.

If the order (of the regulator) is temporarily stayed and the appellate or court proceedings are pending, the same also should be mentioned, RBI added.

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