RBI floats discussion paper on governance in commercial banks

Among other things, the discussion paper bats for greater power to the bank boards, separation of ownership from management and setting up of proper risk management strategy.

Mumbai: The Reserve Bank has released a discussion paper to improve governance in commercial banks.

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, the RBI said. 

Among the major issues that the paper highlights is to empower the Board of Directors to set the culture and values of the organisation; recognise and manage conflicts of interest; set the appetite for risk and manage risks within the appetite; improve the supervisory oversight of senior management.

The paper also talks on empowering the assurance functions through various interventions; achieve clear division of responsibilities between the Board and the management; and Encourage the separation of ownership from management.

The paper talks about 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.

RBI has sought suggestions and comments on the discussion paper may be sent by July 15, 2020.