Now boarding

Governance premium is set to go up by many notches and banks will be put through the wringer, reports RAGHU MOHAN

- RAGHU MOHAN

We are dedicated to establishing a global model of risk-focused supervision, one that emphasizes strong risk discovery and compliance culture," said Reserve Bank of India (RBI) Deputy Governor Swaminathan J. He was speaking at the 'High-Level Policy Conference of Central Banks From the Global South' in Mumbai last week. And the statement was taken by a few bankers to mean that Mint Road's senior supervisory managers will proactively keep digging for signs of mess in the banks they are assigned to.

Swaminathan's portfolio includes the powerful Department of Supervision, and the RBI may well have signaled it is set to turn the governance knob higher.

Coming as it were after the high-profile second edition of its brass' interface with the boards of private banks (on November 18 in Mumbai) to reiterate the role of boards and independent directors (IDs).

And old peeves remain: boards are becoming "executive" in nature (with just about every other file being forwarded to it). IDs' remuneration continues to be poor compared to what's on offer in wider India Inc and a closer scrutiny of their roles has seen many turning down invites to such positions.

As for climate change and cyber security, it's tough to find people with experience to onboard; non-banks pay far more for such talent. A small pool of IDs has led to boards being packed with the retired - be they bankers, civil servants or those drawn from the RBI; many of whom may not be current with themes in banking and finance. In state-run banks, serving central bank officials on their boards is a clear case of conflict of interest.

More than a business card What makes a bank board job different from the same at a non-bank?