RBI governor red-flags governance gaps in banking sector

The Reserve Bank (RBI) Monday asked banking sector in the country to further strengthen the governance and assurance functions to identify and mitigate risks at an early stage.

The RBI governor was speaking at a conference for the directors on the boards of private sector banks organised in Mumbai. The conference themed at 'Governance in Banks - Driving Sustainable Growth and Stability' was inaugurated by governor Shaktikanta Das. 

"The governor acknowledged the role played by the banks in supporting the economy and maintaining resilience along with improved financial performance in the face of several adverse shocks in recent times," the RBI release said.

The RBI governor asked the directors of banks to further strengthen the governance and assurance functions (risk management, compliance and internal audit) so that the banks are able to identify and mitigate risks at an early stage.

Das said a robust governance structure is the first and the most important requirement for ensuring the stability of a bank as well as sustainable financial performance while listing out some of the guidelines for banks. 

The RBI has issued guidelines listing out seven critical themes which need to be discussed in the Board meetings, he added.

"It is, however, a matter of concern that despite these guidelines on corporate governance, we have come across gaps in governance of certain banks, with the potential to cause some degree of volatility in the banking sector," Das said. 

Das also emphasized the need for banks to ensure continued financial and operational resilience.

Deputy governors MK Jain and M Rajeshwar Rao, along with Executive Directors representing the RBI's Department of Supervision, Department of Regulation and Enforcement Department, and other senior officials, also attended the Conference, the RBI said.