Govt to get powers to supersede PSU bank boards

 The maximum number of shareholder-elected directors will be reduced by half. This means there could be only three shareholder-elected directors. Also, it is not mandatory for the Reserve Bank of India (RBI) to have nominees on the boards of PSBs. RBI will have the option to appoint its nominee as director only in case of exigencies.

The bill amends two acts - the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 and 1980. It will now be tabled in the Rajya Sabha.

On the power to supersede boards of PSBs, finance minister P Chidambaram said "it is just a provision. Hopefully, I don't think we will need to supersede a bank's board since the Reserve Bank of India is constantly monitoring the banks."

The bill also proposes to improve corporate governance, and aims to bring operations of these banks in line with the current international practices.

Chidambaram also responded to issues about the recent finance ministry directive to PSBs to take the approval of their respective boards of directors before implementing hikes in prime lending rates. He said "the government is the owner (of PSU banks) and so, the boards are accountable to us. The boards of the banks should know the views of the government nominee, the central bank nominee and also independent directors' views."