In a move that will make board representation on nationalised banks more in tune with the government's shareholding, the Centre has proposed to reduce the number of directors appointed by non-government shareholders to three from six and do away with mandatory nomination of directors by the Reserve Bank and Financial Institutions(FI). | |
| The changes have been proposed in the Bill to amend the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980, introduced in Parliament yesterday. |
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| While the government proposes to do away with mandatory nominee directors, RBI will still be able to appoint directors on the boards of nationalised banks as the Bill proposes to give the central bank the power to appoint one or more additional directors. |
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| In order to have more functional directors on the boards of the nationalised banks in view of their expansion activities, the government has proposed to increase the number of whole-time directors from two to four. |
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| To give the banks more functional autonomy, the Bill has proposed to empower the shareholders of the nationalised banks to discuss, adopt and approve the directors' report, annual accounts and balance sheets. |
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| The Bill has also recommended annexing the details of the bank's subsidiary(s) with the annual report of the bank, including balance sheets, profit and loss accounts and reports of auditors. It is also provided that nationalised banks transfer the unclaimed dividends for more than seven years to Investor Education and Protection Fund. |
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| The Bill says the government may supersede the board of a nationalised bank and constitute a Financial Restructuring Authority (FRA) and appoint a CEO. The boards may be superseded for a maximum of three years. The FRA would comprise three to seven members to be appointed by the government |
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| The uninterrupted tenure of a large number of part time non-official directors on the boards of directors of FIs is likely to be cut short as the bill proposes to ensure that they vacate their office on completion of three years even if their successor is not appointed. The amendment has been proposed to ensure such directors vacate their offices in time. |
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