Time to plug governance gaps in banks: RBI dy guv

NEW DELHI: Time is perhaps right to address gaps in governance frameworks of banks, a top RBI official has said, amid reports of lapses by various banks, which have invited action by the central bank.

“The banking sector in India at this juncture is sound, resilient, and financially healthy. So, the time is perhaps right to improve the plumbing by addressing the gaps in governance frameworks, assurance functions and strategise for better times ahead,” RBI’s deputy governor Rajeshwar Rao said.

He was addressing the conference of directors of banks organised by the RBI for public sector banks, recently. Rao’s comments have come just days after RBI governor Shaktikanta Das had said that the central bank had found some gaps in banks’ corporate governance despite issuing guidelines on the matter.

He had advised that banks’ boards and management should not allow such gaps to creep in.

These views by the central bank’s top brass have come when quite a few governance lapses have been reported by various banks, attracting action by the RBI. Rao further said in his address that bank boards often do not pay attention to matters related to conduct. Pointing out that customer service, customer conduct and ethical employee behaviour are key in banks, Rao said banks’ boards should pay close attention to these aspects.

“Good or rather best practices in these areas are the key soft pillars which build the edifice of a successful financial institution, more so in these challenging times,” he said.