Governance in Banks and Finanical Institutions is extremely important because banks and FIs are the main drivers of growth of the economy. Many a time, it has been noticed that the Board of Directors remain passive spectators instead of performers. The independent directors and the various committees of the Board fail to discharge their responsibilities and miss the compliance of regulations. Ethics and values, culture and communication are also casualties making the banks' inability take firm action on frauds and moneylaundering. Even the risk management function has become highly sophisticated exercise due to the intensity of cyber risks. Banks and FIs should be creators of a dream society where ethics and values play key role.

1. Corporate
Governance in
Banks and FIs
B. Yerram Raju, Ph.D.,
Former Dean of Studies, ASCI &
Founder Director, TIHCL

2. Session Layout
Introduction
GRC framework
Board and its Roles
Better Boards
Challenges to Management
Behavioural Change
Ethics, Values and Performance
Case Study of NFRA
International Expectation
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3. Introduction – Need for CG
Banks are the main drivers of the economy set to move from $3.4trn now to $8.5trn next decade (Morgan
Stanley)
No two banks are similar in governance and management
Keeping pace with the volume and velocity of regulatory responsibilities – are you ahead of change or
behind?
Banks with RBI directors on Board and those without them did not qualitatively differ
Mandatory Committees of the Board also differ qualitatively
Uncertainties and Risks are on the rise globally and domestically
Bank Soundness, Bank Efficiency and good Corporate Governance – RBI DEA Paper 2022 discussed
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4. CG & The Dream
Society
Transition
from fear
of Y2K to
IT and
IOT
Information Society
rewards skillful
manipulators of data
In tomorrow’s
dream society,
storytelling
gains– A techno-
economic society
is the future.
Games,
Animations,
Stories, Robots
for service
replacing
humans?
A dream society requires
values, - ethical, social, or
religious.
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 CG is all about procedures and
processes and excellence
 Board guides, directs, sets the Vision,
Mission, decides on strategies
 Relationship with stakeholders,
shareholders, regulators and structured
interactions through the Board
Committees.
 Ensure Social Capital :-the presence of
networks, relationships, and connections
within any organization or, more broadly,
community or culture.
 Building a culture of belonging and
diversity

5. Scope of Governance
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 Governance, Risk and Compliance (GRC framework)
 “Extends beyond the equity governance (shareholders) to
encompass debt governance (debtholders) – 53% of Frauds are
credit-originated.”
 Decides coherent list of risks and controls
 Risk management aligning with business units’ goals
 “Tepid performance of the PSBs, frauds and money laundering,
necessitate greater transparency and improved corporate
governance.”
 The worst vulnerability to fraud since the commercial traffic began to
flow on internet

6. Types of Directors
Executive Directors, Non-Executive Directors (Responsible for the supervision and
assist Eds) Appointed under Sec 2(34) of the Companies Act 2013
Managing
Director
Whole-Time
Director
Key
Managerial
Personnel
Independent
Director
Nominee
Director
Small
Shareholder
Director
EXECUTIVE DIRECTORS
Non-Executive
Directors
Officer-in-Default
under Sec 60 of
the Companies Act

7. Role
Clarity
Strategy &
Direction
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8. Committee
s of the
Board
Management Committee
Recruitment and Remuneration
Committee
Risk Management Committee (Can
include expert)
Technology Committee – Cyber Risks
oversight
Investment Committee appointed by
the Board
Financial Inclusion Committee
Ethics Committee
Audit Committee (Can include external
expert)
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9. Board’s Focus – Challenge Management
 Critical Operations: Execution,
delivery and process management
(operational risk under Basel II & III) -
EDPM
 Business Development: Tackling
business disruption and system
failure (BDSF)
 Risk management: Climate risk and
sustainability, (green finance)
Digitizing the Risk Function
 Regulatory Compliance
 Ethics, Values, Environment
 Adding Value is implicit
Staying Ahead – Not an
Easy Task
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10. Better Boards
Ethics
Quality
Competence
Sustainability
Continuity
Value
Management
Performance
Management
Information
Management
Statement
of the
Member
Parameters
for
assessment
Board
Retreats
Level
thyself
Persons of
Experience
and
Excellence
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Disclosure &
Transparency

11. Over 30
Topline
promoters
and CEOs
Sent to
Jail after
2011!!
• Rana Kapoor, Yes Bank
• Kochars – Chandana and Deepak, ICICI Bank
• Rakesh Kumar Wadhawan and son Sarangi (HDIL)
• Dheeraj Wadhawan (DHFL)
• Kamal Kishore Gupta (Omkar Group)
• Ravi Parthasarathy (IL&FS)
• Dham brothers (2019-22) ET 8.11.2022 Serious Fraud Investigation
Agency investigating the case involving 17 banks of which only 5
banks so far responded.
• Cases of cheating, forgery, bribery, defrauding large bank
consortiums, totting up financial irregularities that cut across
continents. (Refer ET Prime, 25.07.’21, 8.11.2022)
Exposed – Investigations continue for years
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CAG, CBI,
CVC,
Serious
Fraud
investigatio
n Teams,
Threat or
Strength to
the System?

12. ETHICS,
VALUES,
ENVIRONMENT,
SOCIETY AND
GOVERNANCE
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“Ethics is in origin, the art of
recommending to the others the sacrifices
required for co-operation with oneself”.
(Bertrand Russel)
Ethical behaviour is doing what is best in
enhancing the trust and confidence between
two entities so that both entities feel
energized and enthused to work towards the
betterment of common good.

13. Success can breed
complacency
 Rule Book not Necessary as it absolves
the Board a sense of responsibility.
 Boards should have a person of value
to bring something different to the
table.
 Objectivity and originality compensates
inadequate or lack of sectoral
knowledge.
 Management teams should be enabled
to do the ‘right thing’.
 Smaller boards are better boards, a
recent discussion on the size
concludes.
 What goes beyond the Board meeting
should be brought to the table.
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14. How is Board Performance
Evaluated?
A dialogue around numbers?
A dialogue around the people
who mattered?
Board Room Dynamics?
Board Room Behaviour?
Did the Board facilitate the
opportunity for developing myself
to improve my performance?
One-size-fits-all won’t do while
putting the performance index.
Board itself should decide
collectively on the performance
indices depending on its activity
profile. It is context driven.
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15. Summary
Attendance and punctuality
Bringing value to the Board ethically and strategically
Sensitivity to the environment, society and governance
Ensuring regulatory compliance
Guiding and directing management for results
Encourage innovation and be passionate
Measuring Risks and creating risk appetite
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16. To Conclude…
If all you have is hammer,
you keep searching for
nails to hit the wall.
The mind follows the heart,
passion wins more battles
than ability. Board
Members should have
passion.
Thank You
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