RBI Regulation of Private Banks

Why in news?

The Reserve Bank of India is said to tighten the regulatory norms for the private banks.

What is the proposal?

• Reserve Bank of India (RBI) plans to “sensitise” the private banks' boards.
• RBI officials will brief bank boards on the role of independent directors.
• They would also sensitise independent directors on their liabilities under the

1. Prevention of Corruption Act (PCA)
2. Companies Act
3. Criminal Procedure Code (CrPC)

• The central bank may even tighten the criterion for electing and appointing such directors.

What is the need?

• The central bank’s move comes two years after a decision by the Supreme Court (SC) in 2016.
• SC observed that “officers” of private banks are “public servants” under the PCA.
• The judgment paved way for strengthening the anti-corruption enforcement measures in the private arena.
• The PCA (Amendment) Bill, 2013 also sought to include private players into the ambit of the PCA.
• The immediate trigger is a recent Central Bureau of Investigation’s (CBI’s) first information report.
• It named two independent directors of IDBI Bank over a Rs 6-billion loan given by it to former Aircel promoter.
• Notably, the bank is not a private one and is government-owned (but not nationalised).
• Besides, a recent case of possible misconduct by ICICI Bank CEO highlighted the concerns in corporate governance.
• Also, there are concerns with the disclosed levels of non-performing assets at few private banks.
• There are variations in these when compared to the RBI’s assessment.
• These have led the central bank to tighten its regulation on the role of independent directors.

Source: Business Standard