CS for banks | RBI Discussion paper on ‘Governance in Commercial Banks in India’

RBI has released a discussion paper today i.e. 12th June 2020, on ‘Governance in Commercial Banks in India’ for public comments To align the current regulatory framework with global best practices while being mindful of the context of domestic financial system.

Major Key Highlights – From Company Secretary (CS) Prospective:

1. Appointment of Company Secretary for Banks:

• All banks whether listed or otherwise, shall have a Company Secretary who is bound by the professional standards of a Company secretary.
• The secretary shall report to the Chair of the board

2. Performance assessment and Roles of the company secretary

• shall be undertaken by the NRC based on the feedback provided by the Chair of the board.
• work closely with the compliance function of the bank
• distinct separation of roles, duties and reporting lines
• The management of the bank shall not be involved in performance assessment.

3. The role of the head of compliance function is:

specific to the role expected of the bank being an RBI regulated entity while the role of the company secretary is to be defined by the fact that a bank is also a company or body corporate.

4. Responsibility of the company secretary:

• ensure that the management makes available the agenda items within the time frame stipulated by the board, its committees and
• the minutes of the meetings of the board as well as the committees of the board are recorded as per the professional standards required.

5. Secretarial Audit Applicability:

• All banks including those not listed and/ or operating as branches shall undertake secretarial audit in line with provisions of section 204 of the Companies Act, 2013 the scope of which shall include compliance to guidelines/directions emanating from this Discussion Paper.
• The Secretarial Audit report shall be made available to the ACB which shall have an oversight over compliance to various gaps reported by the audit.

6. Compensation of the functionaries in the Company Secretariat

• shall be recommended jointly by ACB as well as NRC and approved by the board.

Relevant RBI Press Release is as follows:-

RESERVE BANK OF INDIA

Date : Jun 11, 2020

RBI releases Discussion Paper on ‘Governance in Commercial Banks in India’

The Reserve Bank of India today released on its website a Discussion Paper on ‘Governance in Commercial Banks in India’ for public comments.

2. The objective of the discussion paper is to align the current regulatory framework with global best practices while being mindful of the context of domestic financial system. Accordingly, some of the major highlights of the paper are as follows:

i. Empower the Board of Directors to

a. set the culture and values of the organisation;

b. recognise and manage conflicts of interest;

c. set the appetite for risk and manage risks within the appetite;

d. improve the supervisory oversight of senior management;

ii. Empower the assurance functions through various interventions;

iii. Achieve clear division of responsibilities between the Board and the management; and

iv. Encourage the separation of ownership from management.

3. Improving the quality of governance in financial intermediaries is an important determinant of efficiency in allocation of resources, protection of depositors’ interest and maintaining financial stability. In this endeavour, the paper has been drafted to encourage stakeholder feedback.

4. Suggestions and comments on the discussion paper may be sent by email latest by July 15, 2020.

(Yogesh Dayal)
Chief General Manager

Press Release: 2019-2020/2485