In a bid to induct talented and competent candidates for the post of independent directors in Public Sector Banks (PSBs), the Prime Minister’s Office (PMO) is planning to vet all applications and send its recommendation to the bank selection panel and Finance Ministry for final screening followed by an interview. Thereafter, the final appointment will be made on the basis of merits of candidates as per the decision of the concerned selection panel or newly-proposed Bank Board Bureau (BBB) of the Finance Ministry.
“If you are an aspiring candidate for the post of independent director, you need to send in your application to the PMO for final screening. The PMO will vet your application, and thereafter it will recommend the shortlisted candidates for an interview. The PMO will shortly publish an open advertisement in print and other media for the said post in this regard,” sources in the Finance Ministry told The Pioneer, adding that the PMO will take the final call in screening the candidates to take them forward in this connection.
Sources, however, said that this issue would be discussed in detail in the forthcoming bankers’ meet to be held in Mumbai on April 28. According to the Finance Ministry, guidelines relating appointment of non-official directors or independent directors are being revisited to ensure that bank boards get people with relevant expertise. “Anybody eligible would be able to apply through a website which will soon be available in public domain,” it said.
When enquired about the PMO’s move on this issue, Chairman and Managing Director (CMD) of a PSB said, “Earlier, banks were appointing independent directors of their own, but now the Government is considering getting it done through BBB, and the final selection of applications will be made by the PMO. First, applicants will have to apply for the post, which will be screened by BBB, and finally the PMO will take a call in this regard.”
“This is, however, still in discussion stage in the Ministry and we are waiting for the final outcome soon,” the CMD added. In order to improve the governance of PSBs, the Government intends to set up an autonomous BBB with professionals as its members. It would be responsible for search and selection heads of PSBs, as also non-official directors on the bank boards. “The is would be an interim step towards moving the direction of having Bank Investment Company,” Finance Minister Arun Jaitley had hinted in the quarterly review meeting of banking performance held last month.
The BBB, a part-time board with a permanent secretariat, would be a six-member body in which five professionals would be from banking, management and other relevant fields. Secretary (Financial Services) of the Finance Ministry would be the only representative from the Government on the Board. It would select Whole-Time Directors, Non-Official Directors, and Non-Executive Chairman of PSBs and would also take up functions of advice regarding strategy/capital planning after it stabilises other functions
Recently, the Government tightened rules for the appointment of independent directors on the boards of PSB banks, insurance companies, other financial institutions and the Reserve Bank of India (RBI), seeking to improve standards of corporate governance at such institutions. As per new guidelines, a non-official director should be at least a graduate with 20 years of relevant experience with a proven track record, and should not be a Member of Parliament, State legislative Assembly or a stock broker, the new guidelines released by the Department of Financial services had said.
Further, it said an independent director should not be more than 67 years of age. “Retired senior Government officials, retired CMDs and Executive Directors (EDs) of state-run banks, academicians and Chartered Accountants with relevant experience can apply. Former CMDs and EDs can only apply for an independent director’s post after one year of retirement, and that too, not in the bank from which they have retired,” it added.
According to the Government estimates, at present, there are reportedly over 60 vacancies for non-official directors in banks and financial institutions in the country. The Government has already separated the CMD post in state-run banks and streamlined the appointment process, making it more transparent. The guidelines were issued after they were approved by the Appointments Committee of the Cabinet, headed by Prime Minister Narendra Modi.