Bank Boards Bureau Wants To Split Supervisory, Management Roles At State-Run Lenders

The Bank Boards Bureau on Tuesday suggested that the supervisory role of the board of a bank be separated from its management functions to improve governance.

It also said that the number of committees on bank boards and their mandate should be rationalised, according to recommendations put out on its website. The bureau 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.”

The bureau was set up in February 2016 with former Comptroller and Auditor General Vinod Rai as it chief to improve governance standards, select bank chiefs and suggest ways to raise capital. Its success has been limited as appointments are still controlled by the government.

It intends to set up a nomination and remuneration committee 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 strategy to groom bank leaders for the future who can lead the transformation of public sector banks to more modern entities with better public services.