Don't nominate politicians on bank boards: HC

The Gujarat High Court has criticised the practice of government nominating members of political parties as non-official directors (NoDs) on boards of public sector banks, saying it sends a wrong signal.

Disposing of a PIL by Ahmedabad-based Senior Citizens Services Trust, it said, “Such appointments would do no good to the public sector banks, many of which are reeling under tremendous economic crisis.”

A division bench comprising Chief Justice Radhakrishnan and Justice Anil Kureshi observed, “Serious thought has to be bestowed (by the government) while nominating NoDs to various public sector banks keeping in mind their special knowledge and practical experience in various fields, which would help the bank in formulating various policies.”

Independent directors, or non-official directors in banking parlance, are usually appointed to represent the interests of depositors. According to Section 9(3)(A) of Banking Companies (Requisition and Transfer of Undertaking) Act, they are required to possess special knowledge or practical experience in various fields.

The PIL had said the appointments were done not on merit but to favour politicians.