The RBI is seeking directors of banks to be more active

The Reserve Bank of India desires increased participation from bank directors in committee and board meetings, particularly in private banks. When conducting the annual bank inspections for 2023, the RBI reviewed the specifics of these discussions. This year’s inspection placed equal emphasis on intangible factors like directors’ engagement as it did on routine financial aspects, according to a report in The Hindu Business Line.

The regulator is concerned because most board members do not contribute much during meetings. They discovered that typically, just one or two people, such as the CEO, actively participate, while the others, particularly independent directors, remain silent. Recently, the central bank has been vocal about the importance of improving the quality of governance within banks. Given their responsibilities to depositors, the regulator expects banks to function with competent board leadership. They emphasised the need to have an engaged, active board, which they believe is lacking in many banks, particularly private banks. Furthermore, as part of its efforts to promote smooth transfer and succession planning, the RBI has directed private banks to recruit at least two full-time directors.