NEW DELHI: The finance ministry has directed public sector banks (PSBs) to undertake a third-party evaluation of their boards’ performance, in the wake of instances of misgovernance at the helm of a few lenders that also raise questions about the scrutiny exercised by their boards, a senior government official told Business Standard.
“Since a couple of governance issues have arisen in the banking sector, we have directed PSBs to get an external agency evaluation to assess key aspects of corporate governance, including their board composition, structure, and overall effectiveness,” the official said. “The exercise should examine the oversight and functioning of board-level committees, and the boards’ effectiveness in areas like ethics, compliance, risk management, independence, and alignment with the institution’s vision and strategy.”
Some lenders have already initiated this process, including State Bank of India, Bank of Baroda, Punjab National Bank, Union Bank of India, and Central Bank of India, while UCO Bank, Indian Overseas Bank, Bank of India, Canara Bank, Punjab & Sind Bank, Indian Bank, and Bank of Maharashtra, are expected to undertake the exercise soon, the official conveyed. “These evaluations are being undertaken by professional consultancy firms such as Deloitte Touche Tohmatsu India LLP and KPMG India Services LLP,” he noted.
“Independent third-party board evaluations are a widely accepted global practice, and India has only recently begun adopting them,” remarked S Krishnan, former managing director and CEO of Punjab & Sind Bank, who said the initiative could significantly enhance board functioning and accountability. However, confidentiality and sensitivity are paramount, given that banking is fundamentally different from other sectors, he pointed out.
Earlier this year, IndusInd Bank had come under the regulatory scanner for accounting discrepancies in the derivatives and microfinance segments amounting to nearly 2.35 per cent of its net worth as of December 2024.
The bank, which reported its worst ever performance in the January-March 2025 quarter, disclosed its board suspects that fraud may have been committed against the bank that could involve certain employees with significant roles in the bank’s accounting and financial reporting. The bank’s managing director and CEO, as well as deputy CEO had stepped down in April ahead of its Q4FY25 results.
Separately, the Union Bank of India’s decision to buy around 2,00,000 copies of a book authored by former Chief Economic Adviser Krishnamurthy Subramanian, had raised eyebrows.
Source: Business Standard