The Reserve Bank of India urged the directors of Urban Co-operative banks to further strengthen governance practices emphasizing the importance of a professional Board of Management as the quality of governance was the most important aspect in ensuring stability of individual banks.
The Reserve Bank stressed the need to strengthen the three pillars supporting pillars of compliance, risk management, and internal audit. The quality of governance was the most important aspect in ensuring stability of individual banks said RBI governor Shaktikanta Das ,addressing a conference of directors on the Boards of Tier 3 and 4 Urban Cooperative Banks (UCBs) in Mumbai Zone on the theme ‘Governance in Banks – Driving Sustainable Growth and Stability’.
He noted that while the financial performance of the UCB sector improved at an aggregate level in recent times, concerns and vulnerabilities are seen for certain individual entities. “ UCBs to strengthen their financial and operational resilience so as to contribute to the overall financial and banking sector stability” he said.
Urban Co-op Banks Need Strong Boards for Good Governance: Das
On the functioning of Boards, the governor emphasized five aspects – adequate skills and expertise of directors, constitution of a professional Board of Management, diversity and tenure of Board members, transparent and participatory nature of Board discussions, and effective functioning of Board level Committees. He also emphasized on a planned approach towards human resources in the UCBs to ensure adequate quality and right size of manpower in UCBs.
The Governor urged the boards to be more proactive in asset liability management and the necessity of managing liquidity risk in a more systematic manner. He also stressed that the board’s role is pivotal in establishing a robust IT and cyber security infrastructure and availability of requisite skills at the bank level. “The management of the UCBs should enjoy the required autonomy in their functioning” the governor said.
He emphasised that the role of directors is very significant in ensuring the integrity and transparency of financial statements, and cautioned against use of innovative accounting practices to camouflage the actual financial position.
Deputy governors M Rajeshwar Rao and Swaminathan J along with Executive Directors representing the RBI’s Departments of Supervision, Regulation and Enforcement, and other senior officials, also participated in the Conference.
Courtesy: Economic Times Dt. 30th Aug. 2023