Financial Daily from THE HINDU group of publications
Sunday, Jun 23, 2002
Financial Daily from THE HINDU group of publications Sunday, Jun 23, 2002 |
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Banking Money & Banking - People Bank boards are out of bounds N.S. Vageesh
CHENNAI, June 22 BEING an MP or MLA is going to be a disadvantage — if such politicians seek to become directors on the boards of banks. The A.S. Ganguly Committee, which reviewed the supervisory role of bank boards, has recommended that it would be advisable to have independent, non-executive directors who are not MPs/MLAs. It appears that the committee came to this conclusion after observing that most working politicians found it difficult to resist requests for their "help". According to a person familiar with the approach of the committee, it was felt that "politicians generally lack the ability to say `No'. And this often reflects on the functioning of the organisations with which they are associated — whether it is a social service organisation or a business enterprise. Banks, being trustees of public funds, are more prone to getting hurt if they are subject to undue influence or pressure". In the past, a number of bad loans given by public sector banks and financial institutions were attributed to political pressure — exercised outside boards. The idea behind recommending the barring of MPs/MLAs is to ensure that bank boards are manned by professionals and experts who can take an independent stance — and stand up to pressure if necessary, says the source. In fact, the Ganguly Committee has recommended the setting up of a talent pool of independent, non-executive directors, from which public sector banks could draw upon to fill up board vacancies. It has recommended that a nomination committee of the board be constituted to consider and present its recommendations on the merits and demerits of individual candidates for board membership, and the board could make the final decision. The committee's recommendations, if implemented, will see bank boards sporting a new and more professional look.
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