16 Composition of Boards 1 Boards should be more contemporarily professional by

16 composition of boards 1 boards should be more

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16 Composition of Boards 1. Boards should be more contemporarily professional by inducting technical and specially qualified personnel. There should be a blend of ―historical skill‖ set and ―new skill‖ set, i.e. skills such as marketing, technology and systems, risk management, strategic planning, treasury operations, credit recovery, etc.
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Page 294 of 580 2. Directors should fulfill cert ain ―fit and proper‖ norms., viz., formal qualification, experience and track record. To ensure this, companies could call upon the candidates for directorship to furnish necessary information by way of self-declaration, verification reports from market, etc. 3. Certain criteria adopted for public sector banks such as the age of director being between 35 and 65, that he/she should not be a member of parliament/ state legislatures, etc. may be adopted for private sector banks also. 4. Selection of directors could be done by a nomination committee of the board. The Reserve Bank of India (RBI) also might compile a list of eligible candidates. 5. The banks may enter into a ―Deed of Covenant‖ with every non -executive director, delineating his/her responsibilities and making him/her abide by them. 6. Need-based training should be imparted to the directors to equip them govern the banks properly. In the selection of directors for banks, boards should be more contemporarily professional by inducting technical and specially qualified personnel. To ensure this, companies could call upon the candidates for directorship to furnish necessary information by way of self-declaration, verification reports from market, etc. The Ganguly Committee has suggested the formation of the following committees of the board, in addition to the Nomination Committee: Audit Committee, Shareholders‘ Redressal Committee, Supervisory Committee and Risk Management Committee. The job of the first two committees is well known in all big corporates in India. Incidentally, the Reserve Bank has prescribed that the audit committee should be presided over by a Chartered Accountant Director, but Ganguly Committee opined that it could be done by any non-executive director. Risk Management Risk management has taken centre stage in any discussion on management of banks in the recent past. To be sure, risk taking is as old as banks. Banks are in the business of taking deposits, repayable virtually on demand and lending/ investing the funds in illiquid assets. The action of converting liquid funds into illiquid assets, with maturity mismatches between the two, is a certain recipe for risk. Banks have known and managed this risk fairly well over centuries of their existence. In the last few decades, however, newer varieties of risk have arisen, because, in the pursuit of high returns, banks have embraced higher risks. The risks about which many bankers are not fully familiar are in the realm of off-balance sheet commitment, market risks, interest risks and those associated with derivatives. It will not be an exaggeration to say that a vast majority of directors of banks in
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