Banks Board Bureau wants to separate supervisory & management roles in banks

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The Banks Board Bureau (BBB) on Tuesday suggested that the supervisory role of the Board of a bank be separated from its management functions to improve governance in public sector banks.

It also said that the number of committees on bank boards and their mandate should be rationalised, as per its recommendations listed on its website on Tuesday.

The BBB, chaired by former Comptroller and Auditor General Vinod Rai, wants to “empower the non-official directors of PSBs (public sector lenders) to play the role of independent directors on the same lines as provided in the Companies Act, 2013.”

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The BBB was set up in February 2016 to improve governance standards, professionalise PSBs, select bank chiefs and suggest ways to raise capital.
However, the BBB has seen little success with a few members leaving while another reinstated after resignation. Further, the BBB’s appointment recommendations were changed by the government last year.

On Tuesday, it said the BBB intends to set up a nomination and remuneration committee (NRC) of the board with composition and mandate along the same lines as provided in the Companies Act, 2013.

The Bureau wants an optimal board composition with expertise in the areas of risk management, information technology and human resource management, according to the recommendations. It wants the NRC to conduct a search for non-official directors and decide on remuneration of non-executive directors.

The bureau said it is working on leadership and succession planning by devising a world-class strategy to groom bank leaders for the future who can lead the transformation of public sector banks to more 21st century banks – modern entities with better public services and meet competition.

The Bureau will also be advising the government on evolving suitable training and development programs for management personal in PSBs, it said.