Indian central bank Reserve Bank of India (RBI) has proposed a series of reforms to combat frauds in banking sector.
According to a report by news agency PTI, RBI Governor Shaktikanta Das said that the central bank will focus on corporate governance reforms across the banking and non-banking space. The move is aimed at increasing transparency and accountability across the banking industry.
RBI reforms:
The proposals include development of effective risk management systems, streamlining board-level appointment process and create a pool of independent directors.
Additionally, the central bank plans to develop a mechanism to assess the performance of senior officials.
Under the plan, the board through a sub-committee will review the performance of the respective bank MDs and CEOs.
The move is envisaged to be implemented across both public and private sector banks.
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By GlobalDataDas was quoted by the news agency as saying: “An essential element of an effective system of internal control is a strong control mechanism. It is the responsibility of the Board of Directors and senior management to emphasise the importance of internal control through their actions and words.”
“Banks should regularly reorient and train their personnel so that they fully understand the importance of internal controls in their respective stations. The boards of banks should specifically pay attention to creating and sustaining a culture of effective control in the banks.”
Concurrently, Governor Das also plans to step-up supervision on non-banking financial companies (NBFCs).
He added that RBI will take necessary measures to ensure stability of the sector in short and in long-run.
The comment comes at the time when major firms operating in the Indian shadow banking sector including Dewan Housing Finance (DHFL) and Infrastructure Leasing and Financial Services (IL&FS) are struggling with various issues.
