RBI Governor advises Bank Boards to adopt fair practices for customer protection
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Mr. Das was addressing a conference of directors of Banks organized by RBI in Mumbai today. He raised concerns about Corporate Governance in some banks. He said, RBI has come across gaps in governance of certain banks, with the potential to cause some degree of volatility in the banking sector. While these gaps have been mitigated, it is necessary that Boards and the management do not allow such gaps to creep in, he added.
He stated that it is the joint responsibility of the Chairman and all Directors to ensure robust governance in banks. Mr. Das stressed the need for the required level of alertness among all directors. Directors and CEOs should foster an atmosphere of free and fair discussions in Board Meetings, he added.
He said, Employees cannot be rewarded for increasing short-term profits without adequate recognition of the risks and long-term consequences. Compensation structure should promote long-term performance and be in line with the bank’s business and risk strategy, objectives, and values and incorporate measures to prevent conflicts of interest, he added.
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