Financial institutions should be board-driven, says RBI Dy Guv

Financial institutions should be board-driven and not end up being dominated by individuals as it could lead to undesirable consequences, Reserve Bank Deputy Governor M K Jain has said.

In his keynote address at CAFRAL, a Centre promoted by RBI, he stressed that an efficient and vibrant financial system is crucial for economic development and social wellbeing of the country.

"The governance framework surrounding the individual players in the financial system assumes a central role not only in terms of value creation for various stakeholders but also in ensuring the oversight of the board on risk appetite and risk culture of individual institution," he said while speaking on 'Importance of Governance and Assurance Functions in Financial Institutions'.

He also emphasised that financial institutions should be board-driven and not dominated by individuals.

"It is important to ensure that financial institutions are board-driven and do not end up being dominated by individuals. Experience has shown that this leads to undesirable consequences," Jain said.

The board members, he said, should focus on strategic and important matters and work in a cohesive manner.

Many times, he added, a large number of agenda items are included, including table items, which do not allow for proper evaluation of the proposals.

The Centre for Advanced Financial Research and Learning (CAFRAL) is an independent body set up by RBI against the backdrop of the country's evolving role in the global economy.