Non-of­fi­cial di­rec­tors at PSBs get code of conduct

The Times of India (New Delhi edition) - - Times Global - Mayur.Shetty @times­

Mum­bai: The fi­nance min­istry has come out with a code of conduct for non-of­fi­cial di­rec­tors of pub­lic sector banks (PSBs) and asked the boards to send an an­nual per­for­mance re­port that rates a direc­tor based on pro­fes­sional and eth­i­cal conduct, and con­tri­bu­tion to the board.

In a com­mu­ni­ca­tion to the MDs of all PSBs, the de­part­ment of fi­nan­cial ser­vices at the fi­nance min­istry said that the gov­ern­ment has de­cided to in­sti­tute cer­tain measures to im­prove cor­po­rate gov­er­nance in banks. The measures in­clude the in­tro­duc­tion of a code of conduct, a re­quire­ment that the non-of­fi­cial di­rec­tors un­dergo a fa­mil­iari­sa­tion of bank­ing prac­tices, and a peer-re­viewed per­for­mance ap­praisal of the di­rec­tors.

The fi­nance min­istry pointed out that while Sebi had a code for independen­t di­rec­tors, which pro­vides for their per­for­mance eval­u­a­tion, the pro­vi­sions do not ap­ply to PSBs as they do not come un­der the Com­pa­nies Act.

“While Bank­ing Com­pa­nies Act does not de­fine independen­t di­rec­tors, non-of­fi­cial di­rec­tors, in­clud­ing non-ex­ec­u­tive chair­men, are sim­i­lar,” the com­mu­ni­ca­tion said. The per­for­mance eval­u­a­tion by peers will mea­sure the direc­tor on var­i­ous pa­ram­e­ters in­clud­ing avoid­ance of di­rect or in­di­rect con­flict of in­ter­est, act­ing ac­cord­ing to rules and in the best in­ter­est of the bank, avoid­ing any gain to self or as­so­ci­ates and main­tain­ing con­fi­den­tial­ity.

The code of conduct for di­rec­tors lists a set of dos and don’ts. One in­ter­est­ing point in this is that each non-of­fi­cial direc­tor has to en­sure that if there are any re­lated-party trans­ac­tions, th­ese have to be ad­e­quately dis­cussed in the board before be­ing ap­proved.

Other points in­clude en­sur­ing that the bank has a proper vigil mech­a­nism and that the in­ter­ests of a per­son who uses such a mech­a­nism are not prej­u­di­cially af­fected on ac­count of such use. The direc­tor also must en­sure that when they have any concern about the run­ning of the bank or any ac­tion, such ac­tions are ad­dressed by the board.

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