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Centre fills vacancies in boards of PSBs, insurers, financial institutions

The Centre has taken a much-awaited significant step towards filling vacancies in boards of various public sector banks (PSBs), insurers and financial institutions (FIs), with the appointment of 25 non-official, part-time directors (non-executive directors).

The Appointments Committee of the Cabinet has approved the appointments of these directors for a period of three years, sources said. It brings an end to the long-standing vacancies in these banks and FIs, official sources said.

This move is expected to enable these banks — most of whom are listed — and public sector insurers to comply with corporate governance regulations issued by SEBI and IRDAI, experts said. Till date, most listed public sector banks were not in compliance with several corporate regulatory norms prescribed by SEBI and IRDAI. This situation will now change with the appointment of non-executive directors as several banks can now go ahead and form committees of the board headed by such directors.

As many as seventeen non-executive directors have now been appointed by the Central government in as many as 11 banks, including State Bank of India (one director to the central board). The other banks are Bank of Baroda (one), Bank of Maharashtra (two), Canara Bank (one), Central Bank of India (one), Indian Bank (two), Indian Overseas Bank (three), Punjab & Sind Bank (one), Punjab & National Bank (two), UCO Bank (two) and Union Bank (one).

The insurance companies where government has now appointed part-time non-official directors under the respective laws governing them are General Insurance Corporation (one) Oriental Insurance (one) and The New India Assurance (two). The Centre has also appointed a part-time non-official director each in Exim Bank, NABARD and National Housing Bank.

Experts’ view

SN Viswanathan, a practising company secretary, said that the latest government move was a long-awaited measure. “The government has filled in vacancies on the board of public sector banks and insurance companies which will enable them to comply with corporate governance regulations like SEBI LODR Regulations and IRDA Corporate governance Guidelines,” he said. This will also enable them to constitute various committees, he added.

Srinath Sridharan, corporate advisor and independent markets commentator, said this is a progressive step by the Central government as a majority shareholder, to bring in non-executive directors into these entities.

“This not only will improve compliance aspects under various regulations but also could allow for quality discussions in these boards. As some of these financial entities scale up and/if at all, get set for partial disinvestment, higher governance norms can get them higher valuations,” he said.

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