Government launches process to fill independent director positions in PSBs and FIs
The government has initiated the process of filling approximately 100 vacant independent director positions in public sector banks and financial institutions to meet regulatory standards for corporate governance.
There have been vacancies at independent director level in the public sector space, resulting in regulatory non-compliance, sources said.
According to the Companies Act 2013, each listed public company must have at least one third of the total number of directors as independent directors.
As many public sector listed banks (PSBs) and some financial institutions (FIs) do not have the required number of directors, this is a violation of company law as well as of the market regulator’s listing standards. Securities and Exchange Board of India, sources said.
For example, some banks like Indian Overseas Bank, Indian Bank and UCO Bank do not meet the standards for independent directors.
With the exception of the State Bank of India (SBI) and Bank of Baroda, the post of chairman in most state-owned banks is vacant. The positions of managing director and managing director, representing respectively employees and managers of banks, have been vacant for 7 years.
According to a study, 72 public sector companies (PSUs) were part of the NIFTY 500 in 2019 and 2020. PSUs that are part of the NIFTY 500 had 133 fewer independent directors in 2020 compared to the previous year.
There are 12 public sector banks, four general public sector insurance companies and one life insurance company. In addition, there are specialized insurance players like Agriculture Insurance Company of India Ltd.
In addition, there are public financial institutions such as IFCI, IIFCL, ECGC Ltd and EXIM Bank.
Up to 52% of director positions in the 11 nationalized banks were vacant, the Bank Employees Association of India (AIBEA) recently said in a letter to Finance Minister Nirmala Sitharaman.
Of the 175 board-level positions, 91 are vacant and there is an urgent need to address the issue, AIBEA Secretary General CH Venkatachalam said in the letter.
The positions of worker manager and general manager have remained vacant in 11 nationalized banks over the past seven years, he said, adding that the board of directors of each bank has 7 to 9 vacant positions.
This defeats the very purpose for which these positions were envisioned and created to look after the various interests and areas of banks’ banking operations, he added.
The boards of directors of nationalized banks are guided by the provisions of article 9 of the law of 1970 on banking companies (acquisition and transfer of businesses) and the regime of nationalized banks (management and miscellaneous provisions) of 1970 .
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