Pramod Karnad, Chairman-BOM, Deccan Merchants Coop Bank, spoke on the topic of Governance at the FCBA 2024 conference at Lucknow. Edited excerpts:
Why we should say corporate governance – we can say cooperative governance. What are the most important pillars of cooperative governance? In nutshell, it is accountability to somebody supreme to me – government, regulator, it may it be the depositor, it may it be the consumer who is taking my services, it may even be employees and subordinates. So, accountability and reportability are very important part of governance. Next is transparency, ie all policies are implemented transparently, without any discrimination, especially between one customer and another. When we apply charges, they should not be hidden charges.
CEO and employees should act independently, and have the liberty to take the decisions as per policy. All our stakeholders should know what is right and what is wrong – they should judge and they should have the liberty to take the option of what is correct. RBI is shifting from inspection report to risk assessment report (RAR). In that, the first chapter is on governance itself. RBI expects you to have a good board of directors, you should have sub-committees and you should have professional directors in your board.
The number of these professional directors is currently 51% but at least 2 persons should be co-opted. There are also fit and proper criteria.
At the time of inspection, RBI is assessing what type of governance is going on in this bank in the senior management. What are the policies? Whatever MIS there is, is it good? Does the CEO present these policies and these reports before his board every month? What is the quarterly publication? And when there is transparency, the customer is very happy.
Board of directors have obligation to circulate the agenda in time. The board members should read that agenda. They should come prepared for the meeting.
We have to have integrity, we have to have transparency, we have to have reportability, we have to have accountability to the stakeholders, to the regulators, to the general public, to our consumer, to our customer. With that, everything will happen nicely.
I am sharing my experience at GP Parsik Bank. They had called me to take interviews of very higher posts – GM, CGM, etc. When I went to the boardroom to interview the candidates, at that time only myself and the candidate were there – there was nobody from staff committee, nobody from the board? They explained that the board policy is that in such situations, they will not interfere. They wanted me to act independently. I choose a few people and they got recruited. That’s transparency, that is governance. You know, transparency is very important and there should not be discrimination. It should be applicable to all. With transparency, independence, liberty, reportability and accountability, good governance can be strengthened. RBI is issuing circulars, master circulars, do’s and don’ts and then fit and proper criteria. Many people think that there should not be a board of management because board of directors are there. But board of management, having expert directors, can give feedback and comments on treasury, BDDR, NPAs, etc.
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