The Reserve Bank of India (RBI) is seeking to structure a roadmap for extensive capacity building across bank and non-bank institutions in India.
The central bank is in discussions with the Ministry of Finance, Government of India and the Indian Banks’ Association to make the recommendations of the Committee on Capacity Building in Banks and Non-bank Institutions operational, according to R. Gandhi, Deputy Governor of the RBI.
Mr. Gandhi was speaking at a roundtable on capacity building in banks in Mumbai, organised by the Centre for Advanced Financial Research and Learning (CAFRAL), a think-tank set up by the RBI.
Mr. Gandhi said the concept of capacity building went beyond just training and included human resource development, organisational development, institutional and legal framework development. Capacity building had long been an “obsession” of the Indian government, Mr Gandhi said. The government actively led the process in the banking and securities industries before the regulators took on that role, he pointed out. The Committee on Capacity Building in Bank and Non-Bank Institutions was set up by the RBI in response to recommendations by the Financial Sector Legislative Reforms Commission (FSLRC), a body set up in 2011 to reform the institutional and legal structures of the financial sector. The Committee has envisaged capacity building in terms of HR management practices, underlining the strategic importance of HR in affecting the top and bottom lines of balance sheets, training methodologies and interventions, including requiring employees to pass certification programmes prior to being promoted, and system-wide measures which include creating a banking aptitude test and creating centres of leadership development. Mr. Gandhi said that consulting stakeholders would be crucial to this process.
He felt that there was a need to build capacity at the board and top management levels. Weaknesses in corporate governance had contributed to the financial crisis worldwide, he pointed out.
The Indian Banking Regulation Act (1949) required only 51 per cent of the board of a banking company to have specialist knowledge he said. While mandatory certification of all directors was not yet on the cards, systematic induction and training processes ought to be implemented immediately, Mr. Gandhi said. He underscored the need for a separate certification process for professionals in banks and financial services, creating qualified individuals who could meet the growing complexity of capital markets, and niche products. This would support India as it stood ready to embark on a trajectory of growth, he added.
