excerpts
Widening the pool
Under Section 20 (1) of the Banking Regulation Act (1949), banks are prohibited from having a credit relationship with a company if an ID is drawn from it. Banks with a relationship with such a company have to get the exposures cleared by their boards. “The RBI is worried on conflicts of interests, and rightly so. However, it can consider other ways to address this like approval by the full board of the facilities already in place before an ID had joined the board,” says Ravi Duvvuru, partner-Duvvuru & Reddy LLP, and member of the second Regulatory Review Authority.
A few things follow: A small pool of IDs has meant that boards are now packed with retired bankers, civil servants, and former RBI officials — some of whom may not be current on cutting-edge issues in banking and finance. In the case of state-run banks, another layer of complexity is that of serving RBI officials being on their boards – a clear case of conflict of interest.
aniltikotekar4sme.com 