Strict governance norms for banks soon, says RBI

They will reflect global best practices

December 24, 2019 10:35 pm | Updated 10:37 pm IST - Mumbai

The Reserve Bank of India (RBI) is planning to issue fresh corporate governance norms which will be in line with global best practices.

“The growing size and complexity of the Indian financial system underscores the significance of strengthening corporate governance standards in regulated entities,” the central bank said in the Trend and Progress Report of Banking in India 2018-19.

Governance quality

The central bank said recent governance failures in some financial entities have brought to the fore the impact of the quality of corporate governance on efficiency in allocation of resources as well as on financial stability.

“In response, the RBI is in the process of issuing draft guidelines on corporate governance for regulated entities; the objective of which is to align the current regulatory framework with global best practices while being mindful of the context of the domestic financial system,” the Reserve Bank of India said.

On housing finance companies, the report said, following the transfer of regulation of such entities to the RBI, a review of the regulatory framework applicable to them is being undertaken with a view to aligning the regulatory regime for HFCs and NBFCs.

“The focus areas are capital requirements, public deposit regulations and other prudential norms. This augurs well for ensuring a sound and resilient housing finance sector,” the report said.

Commenting on the issue of cooperative banks, the banking regulator said given there was a pressing need for an umbrella organisation for the sector, which can provide liquidity and capital support to member-banks, the RBI has given approval for its formation.

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