Reserve Bank of India (RBI) Governance Oversight

The Reserve Bank of India (RBI) is intensifying its scrutiny of bank board deliberations to enhance governance practices.

Current Oversight and Actions

• SSMs (Senior Supervisory Managers) from RBI are closely reviewing: 
  • Board meeting agendas and the time allocated to each item.
  • The observations made by independent directors and their impact.
  • Discrepancies between audio recordings and board meeting minutes.
• The role and effectiveness of board sub-committees, including: 
  • The quality of discussions and resolutions of disagreements.
  • Inputs provided by sub-committee chairpersons to the board.
• Emphasis on revisiting RBI's regulations: 
  • Corporate Governance.
  • Governance in Commercial Banks.

Historical Context and Recommendations

• The 2015 circular eliminated the 'Calendar of Reviews' to prioritize strategic and financial importance.
• Based on P J Nayak Committee's recommendations (2014), boards focus on: 
  • Business strategy, financial reporting integrity, risk, compliance, customer protection, financial inclusion, human resources.
• The committee found correlations between board discussions and profitability, as well as risk-related discussions and non-performing assets.

Issues Highlighted by Former RBI Governor

• Concerns over incomplete and inaccurate information being presented to boards.
• Agenda notes often lacked comprehensive information or were not provided in advance.
• Excessive reliance on PowerPoint presentations, which limited in-depth discussions.

Key Takeaways

• RBI may soon recommend improvements in board discussions and sub-committee operations.
• Banks are encouraged to align with RBI's regulations from 2016 and 2021 for better governance.