What are the objectives and guidelines for Corporate Governance in Banking System?

Answer 2(b) Banks should have good Corporate Governance which should be much more than complying with legal and regulatory requirements. Good governance facilitates effective management and control of business, enables the Banks to maintain a high level of business ethics and to provide value additions to all their stakeholders. The objective of Corporate Governance would cover: To protect and enhance shareholder value. To protect the interest of all other stakeholders such as customers, employees and society at large. To ensure transparency and integrity in communication and to make available full, accurate and clear information to all concerned. To ensure accountability for performance and customer service and to achieve excellence at all levels. Guidelines for Corporate Governance in Banking System The Banks are guided by Reserve Bank Guidelines regarding Corporate Governance issues. Although, there are no specific code, RBI guidelines and the RBI Act interalia covers various aspect likes, Number of Board of Directors, Minority Shareholders' Nominee, Voting rights of block shareholders, dividend declaration, Credit concentration etc. Listed banks are also subject to SEBI Guidelines entitled SEBI (Listing Obligation & Disclosure Requirements) Regulations, 2015. Overall, banks are expected to follow a high standard of corporate governance practice. The major requirements are briefly pointed out below: Role of Board of Directors: Meet regularly and to provide effective leadership and insights in business and functional areas. Board should monitor Bank's performance. Setting up of a framework of strategic control and continuously review the control mechanism. Overseeing the risk profile of the bank. Ensuring expert management and decision making, internal control and reporting requirement Maximising the interest of stakeholders. Other Committees of Board Audit Committee of Board: Functions as per RBI and SEBI guidelines. Induction of more independent directors. Customer Service Committee: Reviews quality of customer service provided by bank. Special committee for monitoring large value frauds: To monitor and review large value frauds with a view to identify systemic issues/risk, if any. IT Strategy Committee: To track the progress of the Bank's IT initiatives. Remuneration Committee: For evaluating the performance of whole time directors of the bank. Nomination Committee: Carried out 'fit and proper' status of candidates filing nominations for election as Directors by shareholder.