Why in news?
The Reserve Bank of India is said to tighten the regulatory norms for the private banks.
What is the proposal?
- Reserve Bank of India (RBI) plans to “sensitise” the private banks' boards.
- RBI officials will brief bank boards on the role of independent directors.
- They would also sensitise independent directors on their liabilities under the
- Prevention of Corruption Act (PCA)
- Companies Act
- Criminal Procedure Code (CrPC)
- The central bank may even tighten the criterion for electing and appointing such directors.
What is the need?
- The central bank’s move comes two years after a decision by the Supreme Court (SC) in 2016.
- SC observed that “officers” of private banks are “public servants” under the PCA.
- The judgment paved way for strengthening the anti-corruption enforcement measures in the private arena.
- The PCA (Amendment) Bill, 2013 also sought to include private players into the ambit of the PCA.
- The immediate trigger is a recent Central Bureau of Investigation’s (CBI’s) first information report.
- It named two independent directors of IDBI Bank over a Rs 6-billion loan given by it to former Aircel promoter.
- Notably, the bank is not a private one and is government-owned (but not nationalised).
- Besides, a recent case of possible misconduct by ICICI Bank CEO highlighted the concerns in corporate governance.
- Also, there are concerns with the disclosed levels of non-performing assets at few private banks.
- There are variations in these when compared to the RBI’s assessment.
- These have led the central bank to tighten its regulation on the role of independent directors.
Source: Business Standard
