Chakrabarthy calls for clean-up of bank boards

22 Mar 2014

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The banking system in India badly needs a clean-up of governance at the bank board level to remedy the ills that are threatening the efficient functioning of banks in the country, departing Reserve Bank of India deputy governor KC Chakrabarty said on Friday.

KC ChakrabartyChakrabarty called for an end to the largely discretionary policies and adoption of rule-based regulations as followed by banks elsewhere in the world.

''You need to take a call whether our system should be rule-based or principle based. But don't keep it discretion-based as is the case now. I have worked for 30 years in banking industry. In our country everything is discretion-based'', Chakrabarty said at the 35th Skoch Summit in the capital today.

Chakrabarty highlighted the ''big governance deficit'' at banks' boards and the neglect of the idea of financial inclusion as a business proposition.

He said senior management of banks should be made accountable for achieving financial inclusion in a transparent manner.

''Bank boards do not consider financial inclusion as a viable business proposition. They don't apply their mind how to make it viable. They also don't agree that it (financial inclusion) has to be done in interest of society''.

Making bank board accept financial inclusion as a viable business proposition is the need of the hour, he said adding that ''Otherwise our society will not survive''.

Chakrabarty also said in order to strengthen governance at the bank board levels, the policy of selection to bank boards should also be transparent.

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