P. J. Nayak Committee Recommendations

P. J. Nayak Committee Recommendations

Anshu Sindhu Vaibhav Shinde

Samarth Khare Jugal Solanki

Anand Baid Sayali Chodankar

Sameep Singh Satyaki Roy

Anshu Sindhu Vaibhav Shinde

Samarth Khare Jugal Solanki

Anand Baid Sayali Chodankar

Sameep Singh Satyaki Roy

Overview and Crux of Report Overview and Crux of Report

Fragile position of public sector banks Compliance with regulatory capital by 2018 Erosion of capital due to increasing rate of

stressed assets. Boards are disempowered and the selection

procedure is compromised To achieve govt. Objective of fiscal

consolidation

Fragile position of public sector banks Compliance with regulatory capital by 2018 Erosion of capital due to increasing rate of

stressed assets. Boards are disempowered and the selection

procedure is compromised To achieve govt. Objective of fiscal

consolidation

Govt own interest to improve governance and management.

Weak board governance and less transparency High leverage makes banks a riskier

commercial activity External constraints like dual regulation Lack of professional and young people in top

management Govt. stake greater than 50% leads to

inefficiency

Govt own interest to improve governance and management.

Weak board governance and less transparency High leverage makes banks a riskier

commercial activity External constraints like dual regulation Lack of professional and young people in top

management Govt. stake greater than 50% leads to

inefficiency

Private sector bank related issues like ownership constraints stipulated by RBI, rigidity

Sensitivity of loan asset portfolio affect final reporting

More clarity of work and power in case of old private sector banks

Changing Market Structure in Indian Banking

Private sector bank related issues like ownership constraints stipulated by RBI, rigidity

Sensitivity of loan asset portfolio affect final reporting

More clarity of work and power in case of old private sector banks

Changing Market Structure in Indian Banking

Chapter 2 – The Changing Market Structure in Indian Banking

Chapter 2 – The Changing Market Structure in Indian Banking

PSBs have lower profitability and productivity ratios; have lost a significant market share and much weaker asset quality then their private sector counterparts.

Question - Do bank boards have the relevant domain skills, strategic competence and independent thinking which well-run organisations constantly strive for? Does the relationship between the Government and its banks need to be thought afresh?

PSBs have lower profitability and productivity ratios; have lost a significant market share and much weaker asset quality then their private sector counterparts.

Question - Do bank boards have the relevant domain skills, strategic competence and independent thinking which well-run organisations constantly strive for? Does the relationship between the Government and its banks need to be thought afresh?

Market ShareMarket Share

ProfitabilityProfitability

• Return on assets• Average NIM• Net Profit Per Employee• Staff Cost to Operating Expense• Fee Income

• Return on assets• Average NIM• Net Profit Per Employee• Staff Cost to Operating Expense• Fee Income

Asset RatioAsset Ratio

Leverage RatioLeverage Ratio

Capital RequirementsCapital Requirements

Stress TestingStress Testing Scenario 1: No regulatory forbearance on restructured assets is

available and a 70 per cent provision cover is required

Scenario 2: Regulatory forbearance is available in terms of RBI's present norms for restructured assets, together with the need to maintain a 70 per cent provision cover. Further, a 4.25 per cent provision cover is maintained for restructured assets. It is also projected in this scenario that 30% of outstanding restructured assets would convert each year into NPAs.

Scenario 3: Regulatory forbearance is available as before, and the provision cover is lowered to 50 per cent. As in Scenario 2, a 4.25 per cent provision cover is maintained for restructured assets and 30% of restructured assets are projected to be converted into NPAs.

Scenario 1: No regulatory forbearance on restructured assets is available and a 70 per cent provision cover is required

Scenario 2: Regulatory forbearance is available in terms of RBI's present norms for restructured assets, together with the need to maintain a 70 per cent provision cover. Further, a 4.25 per cent provision cover is maintained for restructured assets. It is also projected in this scenario that 30% of outstanding restructured assets would convert each year into NPAs.

Scenario 3: Regulatory forbearance is available as before, and the provision cover is lowered to 50 per cent. As in Scenario 2, a 4.25 per cent provision cover is maintained for restructured assets and 30% of restructured assets are projected to be converted into NPAs.

Scenario 1 Scenario 2 Scenario 30.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

3.80%

6.70%

8.00%

12.20%12.90%

13.30%

Public SectorPrivate Sector

Recommendation 2.1: Given the lower productivity, steep erosion in asset quality and demonstrated uncompetitiveness of public sector banks over varying time periods (as evidenced by inferior financial parameters, accelerating stressed assets and declining market share), the recapitalisation of these banks will impose significant fiscal costs. If the governance of these banks continues as at present, this will impede fiscal consolidation, affect fiscal stability and eventually impinge on the Government's solvency. Consequently, the Government has two options: either to privatise these banks and allow their future solvency to be subject to market competition, including through mergers; or to design a radically new governance structure for these banks which would better ensure their ability to compete successfully, in order that repeated claims for capital support from the Government, unconnected with market returns, are avoided.

Recommendation 2.1: Given the lower productivity, steep erosion in asset quality and demonstrated uncompetitiveness of public sector banks over varying time periods (as evidenced by inferior financial parameters, accelerating stressed assets and declining market share), the recapitalisation of these banks will impose significant fiscal costs. If the governance of these banks continues as at present, this will impede fiscal consolidation, affect fiscal stability and eventually impinge on the Government's solvency. Consequently, the Government has two options: either to privatise these banks and allow their future solvency to be subject to market competition, including through mergers; or to design a radically new governance structure for these banks which would better ensure their ability to compete successfully, in order that repeated claims for capital support from the Government, unconnected with market returns, are avoided.

Chapter 3 – The Content of Board DeliberationChapter 3 – The Content of Board Deliberation

Comparing Board Discussion in Public Sector and Private Sector Banks

Comparing Board Discussion in Public Sector and Private Sector Banks

Recommendation 3.1: There is a need to upgrade the quality of board deliberation in public sector banks to provide greater strategic focus. There are seven themes which appear critical to their medium-term strengths comprising Business Strategy, Financial Reports and their Integrity, Risk, Compliance, Customer Protection, Financial Inclusion and Human Resources. All other items for discussion should be brought to the Boards by exception and should typically be discussed in committees of boards. Among the seven themes identified for detailed board scrutiny, a predominant emphasis needs to be provided to Business Strategy and Risk.

Recommendation 3.1: There is a need to upgrade the quality of board deliberation in public sector banks to provide greater strategic focus. There are seven themes which appear critical to their medium-term strengths comprising Business Strategy, Financial Reports and their Integrity, Risk, Compliance, Customer Protection, Financial Inclusion and Human Resources. All other items for discussion should be brought to the Boards by exception and should typically be discussed in committees of boards. Among the seven themes identified for detailed board scrutiny, a predominant emphasis needs to be provided to Business Strategy and Risk.

Strategic vs. Tactical Focus Strategic vs. Tactical Focus

Recommendation 3.2: As the quality of board deliberation across firms is sensitive to the skills and independence of board members, it is imperative to upgrade these skills in boards of public sector banks by reconfiguring the entire appointments process for boards. Otherwise it is unlikely that these boards will be empowered and effective. Specific recommendations for this purpose are separately made in this report.

Recommendation 3.2: As the quality of board deliberation across firms is sensitive to the skills and independence of board members, it is imperative to upgrade these skills in boards of public sector banks by reconfiguring the entire appointments process for boards. Otherwise it is unlikely that these boards will be empowered and effective. Specific recommendations for this purpose are separately made in this report.

Calendar of ReviewsCalendar of Reviews

Recommendation 3.3: The Calendar of Reviews needs either to be revoked, or else to be freshly designed so as to ensure that the time of the board is spent largely on the seven critical themes listed in Recommendation 3.1, with specific attention given to business strategy and risk management.

Recommendation 3.3: The Calendar of Reviews needs either to be revoked, or else to be freshly designed so as to ensure that the time of the board is spent largely on the seven critical themes listed in Recommendation 3.1, with specific attention given to business strategy and risk management.

Control of Public Sector Banks Control of Public Sector Banks

Establishing fully empowered boards, solely entrusted with the governance and oversight of the management of the banks.

Setting up a Bank Investment Company (BIC) to hold equity stakes in banks which are presently held by the Government.

Establishing fully empowered boards, solely entrusted with the governance and oversight of the management of the banks.

Setting up a Bank Investment Company (BIC) to hold equity stakes in banks which are presently held by the Government.

Banking Investment CompanyBanking Investment Company BIC should be incorporated under the Companies Act, as

a core investment company under RBI registration and regulation

Transfer of powers from the Government to BIC through a suitable shareholder agreement and relevant MOA and AOA.

Government and BIC should sign a shareholder agreement which assures BIC of its autonomy and sets its objective in terms of financial returns from the banks it controls

BIC should be incorporated under the Companies Act, as a core investment company under RBI registration and regulation

Transfer of powers from the Government to BIC through a suitable shareholder agreement and relevant MOA and AOA.

Government and BIC should sign a shareholder agreement which assures BIC of its autonomy and sets its objective in terms of financial returns from the banks it controls

Control of Public Sector Banks (Cont.)Control of Public Sector Banks (Cont.)

The CEO and non-executive Chairman of BIC would be nominated by the Government who should be professional bankers.

CEO to put together the BIC staff team who would be incentivised based on the financial returns

No govt. interference to avoid dual regulations Govt. should not issue any instructions under

the pretext of development objectives.

The CEO and non-executive Chairman of BIC would be nominated by the Government who should be professional bankers.

CEO to put together the BIC staff team who would be incentivised based on the financial returns

No govt. interference to avoid dual regulations Govt. should not issue any instructions under

the pretext of development objectives.

Transfer of the Government holding in banks to BIC

Transfer of the Government holding in banks to BICPHASE -I

Legislative amendments enacted to repeal the existing Acts

A professional board constituted for BIC. All existing ownership functions transferred from the

Government to BIC. All non-ownership functions, whether regulatory or

development nature, transferred from the Government to RBI.

BIC commences the process of professionalising and empowering bank boards.

PHASE -I Legislative amendments enacted to repeal the existing

Acts A professional board constituted for BIC. All existing ownership functions transferred from the

Government to BIC. All non-ownership functions, whether regulatory or

development nature, transferred from the Government to RBI.

BIC commences the process of professionalising and empowering bank boards.

Phase-II The reconstitution of bank boards coordinated

by BIC.

Bank ownership functions continued to be executed by BIC.

Phase-II The reconstitution of bank boards coordinated

by BIC.

Bank ownership functions continued to be executed by BIC.

PHASE-III All ownership functions and role of appointing

directors to be transferred by BIC to the bank boards. BIC to ensure the splits the position of the bank's

Chairman into a non-executive Chairman and a CEO. Strict compliance with Clause 49 of SEBI's Listing

Guidelines A lead independent director would be nominated for

each bank board. BIC responsibility - Protecting the Government's

financial investment in the banks, by raising the financial returns to the Government.

PHASE-III All ownership functions and role of appointing

directors to be transferred by BIC to the bank boards. BIC to ensure the splits the position of the bank's

Chairman into a non-executive Chairman and a CEO. Strict compliance with Clause 49 of SEBI's Listing

Guidelines A lead independent director would be nominated for

each bank board. BIC responsibility - Protecting the Government's

financial investment in the banks, by raising the financial returns to the Government.

Control of Public Sector Banks (Cont.)Control of Public Sector Banks (Cont.)

Uniform license across all broad-based banks, irrespective of ownership

Investment limits also applicable for public sector banks

Making public sector banks competitive Reducing the proposed Bank Investment

Company's investment in a bank to less than 50 per cent will free the bank from external vigilance.

Uniform license across all broad-based banks, irrespective of ownership

Investment limits also applicable for public sector banks

Making public sector banks competitive Reducing the proposed Bank Investment

Company's investment in a bank to less than 50 per cent will free the bank from external vigilance.

Board Of Public Sector BanksBoard Of Public Sector Banks

Good Boards are essential….Provide Divergent viewpointsEffective LeadershipCEO successionHeightened board governance…..Impacts

company performance Favorably Board issues with PSB’s……!!

Good Boards are essential….Provide Divergent viewpointsEffective LeadershipCEO successionHeightened board governance…..Impacts

company performance Favorably Board issues with PSB’s……!!

Appointment Of Top ManagementAppointment Of Top Management Selection Committee: RBI Governor, Deputy Governor , Secretary

for Financial Services….Thorough Interviews. Actual Process: RBI Governor doesn’t’ attend Shortlisting done by department of financial

services….RBI unaware…Arbitrary Process. Room For Subjectivity….Short 5 min

interviews

Selection Committee: RBI Governor, Deputy Governor , Secretary

for Financial Services….Thorough Interviews. Actual Process: RBI Governor doesn’t’ attend Shortlisting done by department of financial

services….RBI unaware…Arbitrary Process. Room For Subjectivity….Short 5 min

interviews

Proposed ProcessProposed Process Form BBB(Bank Boards Bureau)3 Bankers- Retired Commercial BankersChoice to be made in consultation with

Government & RBI. For Transparency : All recommendations to be

made public.Peer Scrutiny: Depoliticize & Professionalize Max Tenure : 3 years

Form BBB(Bank Boards Bureau)3 Bankers- Retired Commercial BankersChoice to be made in consultation with

Government & RBI. For Transparency : All recommendations to be

made public.Peer Scrutiny: Depoliticize & Professionalize Max Tenure : 3 years

Need For Long TenuresNeed For Long Tenures Problem: Top Management have short tenures Solution:Minimum 5 year tenure for Bank Chairman.Minimum 3 year tenure for Executive

Director.Better policies: Promote identification &

grooming of talent.Young talent should be promoted.

Problem: Top Management have short tenures Solution:Minimum 5 year tenure for Bank Chairman.Minimum 3 year tenure for Executive

Director.Better policies: Promote identification &

grooming of talent.Young talent should be promoted.

Vigilance EnforcementVigilance Enforcement

Reluctance to handle credit. Deviation means culpability. Cases drag along….destroying careers.

Cases should be based upon Proof Of Wrongful gains or Evidence Of Self

Benefit. Deviation from laid down procedure should

not form sole basis of case.

Reluctance to handle credit. Deviation means culpability. Cases drag along….destroying careers.

Cases should be based upon Proof Of Wrongful gains or Evidence Of Self

Benefit. Deviation from laid down procedure should

not form sole basis of case.

Recommendation 5.6: During Phase 1 of the three-stage empowerment of bank boards proposed in Chapter 4, the selection of non-official directors should be entrusted to the Bank Boards Bureau.

Recommendation 5.7:Any director on the board of a public sector bank will be eligible to be a director on the boards of at most six other listed companies.

Recommendation 5.6: During Phase 1 of the three-stage empowerment of bank boards proposed in Chapter 4, the selection of non-official directors should be entrusted to the Bank Boards Bureau.

Recommendation 5.7:Any director on the board of a public sector bank will be eligible to be a director on the boards of at most six other listed companies.

Recommendation 5.8: It is proposed that, from the second phase, the maximum term for any director other than whole-time directors be restricted to seven years. Further, after any tenure on a bank board, there would be a cooling-off period of five years, for the director to return to the same bank board, and a two-year cooling-off period for the director to be appointed on the board of any other bank.

Recommendation 5.8: It is proposed that, from the second phase, the maximum term for any director other than whole-time directors be restricted to seven years. Further, after any tenure on a bank board, there would be a cooling-off period of five years, for the director to return to the same bank board, and a two-year cooling-off period for the director to be appointed on the board of any other bank.

Continuance of Talent: Succession Planning

Continuance of Talent: Succession Planning

Clearances from CVC and GovernmentAnonymous complaints delay the procedureSuccession Planning a more composite Exercise

It is recommended that this clearance be conducted only at the stage when candidates are short-listed, and not resumed after the Selection Committee recommends the candidate for appointment.

Clearances from CVC and GovernmentAnonymous complaints delay the procedureSuccession Planning a more composite Exercise

It is recommended that this clearance be conducted only at the stage when candidates are short-listed, and not resumed after the Selection Committee recommends the candidate for appointment.

Recommendation 5.9: A partner or employee of a firm auditing a bank would be conflicted in becoming a director in another bank, in view of the client information which auditors have access to. Likewise, for such partner or employee to be a director in the same bank being audited would violate auditor independence. Therefore, no such partner or employee should be a director on the board of any bank.

Recommendation 5.9: A partner or employee of a firm auditing a bank would be conflicted in becoming a director in another bank, in view of the client information which auditors have access to. Likewise, for such partner or employee to be a director in the same bank being audited would violate auditor independence. Therefore, no such partner or employee should be a director on the board of any bank.

Contrasting SignalsContrasting Signals

Private sector banks have large proportion of independent directors as per stock exchange listing requirements

In PSBs, directors are nominated by government.

Private sector banks have to make “fit n proper” assessment of directors, PSBs need not do so.

Private sector banks have large proportion of independent directors as per stock exchange listing requirements

In PSBs, directors are nominated by government.

Private sector banks have to make “fit n proper” assessment of directors, PSBs need not do so.

Selection to PSB BoardSelection to PSB Board

Bank Boards Beaureu (BBB), in consulation with chairman, finalises the appointment

5 years cooling period after 7 year term to return to same bank board and 2 year term for any other joining bank.

Any director at a PSB eligible to sit on maximum 6 other firms.

No partner or employee of an auditing firm should be on the board of the bank

Bank Boards Beaureu (BBB), in consulation with chairman, finalises the appointment

5 years cooling period after 7 year term to return to same bank board and 2 year term for any other joining bank.

Any director at a PSB eligible to sit on maximum 6 other firms.

No partner or employee of an auditing firm should be on the board of the bank

Ownership Issues in Private Sector BanksOwnership Issues in Private Sector Banks

Ownership Regulation Changes in ownership regulation 2005( for

better governance) Tradition Fresh set of Regulation for issuing the banking

licences Highlight

Ownership Regulation Changes in ownership regulation 2005( for

better governance) Tradition Fresh set of Regulation for issuing the banking

licences Highlight

Ownership Regulations in Other JurisdictionsOwnership Regulations in Other Jurisdictions

Indonesia 25% More the 25% need a central bank approval

Japan 20% or 15 Major stake holder need the central bank approval

South korea 4% can go up to 9% with central bank approval

Fit & proper

Indonesia 25% More the 25% need a central bank approval

Japan 20% or 15 Major stake holder need the central bank approval

South korea 4% can go up to 9% with central bank approval

Fit & proper

RecommendationRecommendation

6.6 Listing of Banks6.6 Listing of Banks

Within a 3 years of commencing a business , all Private banks should get listed according to 2013 guidelines of RBI.

Recommendation :-It would be inappropriate for regulation to stipulate a period within which banks should be listed, particularly from a governance perspective, as premature listing could be injurious to minority shareholders interest. It would therefore be desirable to modify the 2013 guidelines accordingly.

Within a 3 years of commencing a business , all Private banks should get listed according to 2013 guidelines of RBI.

Recommendation :-It would be inappropriate for regulation to stipulate a period within which banks should be listed, particularly from a governance perspective, as premature listing could be injurious to minority shareholders interest. It would therefore be desirable to modify the 2013 guidelines accordingly.

6.7 Capital for Distressed Banks

6.7 Capital for Distressed Banks

Recommendation:-For banks identified by RBI as distressed, it is proposed that private equity funds, including sovereign wealth funds, be permitted to take a controlling stake of upto 40 percent.

The principle of proportionate voting rights should constitute part of the regulatory bedrock which fosters good bank governance, as it aligns investors' powers in shareholder meetings with the size of their shareholding.

Recommendation:-For banks identified by RBI as distressed, it is proposed that private equity funds, including sovereign wealth funds, be permitted to take a controlling stake of upto 40 percent.

The principle of proportionate voting rights should constitute part of the regulatory bedrock which fosters good bank governance, as it aligns investors' powers in shareholder meetings with the size of their shareholding.

6.8 Entrepreneur-Led Banks 6.8 Entrepreneur-Led Banks

Recommendation:-Where the principal shareholder in an entrepreneur-led bank is also the bank's CEO, RBI should satisfy itself that the board is adequately diversified and independent, with professionals of high standing. Where RBI lacks confidence of such independence, the controlling shareholder should be asked to step down as CEO.

Recommendation:-Where the principal shareholder in an entrepreneur-led bank is also the bank's CEO, RBI should satisfy itself that the board is adequately diversified and independent, with professionals of high standing. Where RBI lacks confidence of such independence, the controlling shareholder should be asked to step down as CEO.

Board of Private Sector BanksBoard of Private Sector Banks

Assessment of board governance in terms of Risk Management Competencies

Drawbacks Facilitating Ever greening of assets Not adequately Vigilant

Assessment of board governance in terms of Risk Management Competencies

Drawbacks Facilitating Ever greening of assets Not adequately Vigilant

A. Board governance

RecommendationRecommendationImposing penalties owing to Ever greening of assets Unvested stock options granted from senior officer to whole

time directors who indulged in ill practices, be cancelled in part or full.

Monetary bonuses should be clawed back Chairman of the audit committee asked to step down owing to

on vigilant

Role of National supervisors Paradigm shift in supervision from detailed to risk based

facilitate to conduct detailed checks on the reported quality of bank’s assets portfolio, where compensation mechanism through stock option is quite liberal.

Imposing penalties owing to Ever greening of assets Unvested stock options granted from senior officer to whole

time directors who indulged in ill practices, be cancelled in part or full.

Monetary bonuses should be clawed back Chairman of the audit committee asked to step down owing to

on vigilant

Role of National supervisors Paradigm shift in supervision from detailed to risk based

facilitate to conduct detailed checks on the reported quality of bank’s assets portfolio, where compensation mechanism through stock option is quite liberal.

Miss-sellingMiss-selling

Third party Products: Life insurance & MFs products. Lack of grievances redressing committee for third party

products Miss-selling E.g.- Selling equity linked or ULIP to low

income/ pension holder- Aggressive Business goals- diluting customer protection.

Recommendation Proper oversight of third party products considering customer

protection Positioning of the products with customers risk appetite,

demographics, income level etc. Proper explanation of product features

Third party Products: Life insurance & MFs products. Lack of grievances redressing committee for third party

products Miss-selling E.g.- Selling equity linked or ULIP to low

income/ pension holder- Aggressive Business goals- diluting customer protection.

Recommendation Proper oversight of third party products considering customer

protection Positioning of the products with customers risk appetite,

demographics, income level etc. Proper explanation of product features

Board Compensation: Public vs. PrivateBoard Compensation: Public vs. Private

Acc. Companies Act.- 1% of firms profit paid out as a commission to board members except part time directors compared to no remuneration in public sector banks.

Inequality in Board compensation: In private sector banks incentives like share of profits

Recommendation Profit based commissions for non-executive directors should

be permitted in but not before phase three of transaction mechanism(Direct to indirect control- phases defines government as sovereign to government as investors)

Acc. Companies Act.- 1% of firms profit paid out as a commission to board members except part time directors compared to no remuneration in public sector banks.

Inequality in Board compensation: In private sector banks incentives like share of profits

Recommendation Profit based commissions for non-executive directors should

be permitted in but not before phase three of transaction mechanism(Direct to indirect control- phases defines government as sovereign to government as investors)

Age of DirectorsAge of Directors Acc. to Companies Act, 2013- Min is 21 and max is 70 ( later

can be exceed by shareholders through special resolution)

Private sectors bank: Min. Age-Directors is 35 ( RBI) Max age-Part time directors Min. age is 70 No max. age for whole time directors For a bank CEO maximum age of 65 is proposed Incumbents of younger people in boards serving a long tenure.

Recommendation: The min and max age prescribed by companies Act, 2013 is

applicable to all directors of private sectors banks. For whole time directors the maximum age would be 65

Acc. to Companies Act, 2013- Min is 21 and max is 70 ( later can be exceed by shareholders through special resolution)

Private sectors bank: Min. Age-Directors is 35 ( RBI) Max age-Part time directors Min. age is 70 No max. age for whole time directors For a bank CEO maximum age of 65 is proposed Incumbents of younger people in boards serving a long tenure.

Recommendation: The min and max age prescribed by companies Act, 2013 is

applicable to all directors of private sectors banks. For whole time directors the maximum age would be 65

Board Governance: Old Private Sector BanksBoard Governance: Old Private Sector Banks

Three elements of governance practice in community banks Promoter director- belong to founding promoter’s family-

shareholders support close to the family. Promoter director; deciding board composition and control

board decision Promoter director presence in committees like employee

promotion ( community biasedness), credit management (act of gratification)

Result: Disempowering CEO, Mounting NPA owing to poor credit management.

Three elements of governance practice in community banks Promoter director- belong to founding promoter’s family-

shareholders support close to the family. Promoter director; deciding board composition and control

board decision Promoter director presence in committees like employee

promotion ( community biasedness), credit management (act of gratification)

Result: Disempowering CEO, Mounting NPA owing to poor credit management.

RecommendationRecommendation

For old private sector banks RBI doubt of community influence on board, it mandate all director appointments be made with prior approval of RBI. It should be RBI endeavor to ensure adequate director independence in board.

If CEO has full control over the executive management of the banks, it should assess the area of interventions in bank committees, mandate a separation between board oversight and executive autonomy.

For old private sector banks RBI doubt of community influence on board, it mandate all director appointments be made with prior approval of RBI. It should be RBI endeavor to ensure adequate director independence in board.

If CEO has full control over the executive management of the banks, it should assess the area of interventions in bank committees, mandate a separation between board oversight and executive autonomy.