11

Role of Board of Role of Board of DirectorsDirectors

in Strengthening in Strengthening Corporate Governance Corporate Governance

in Banksin Banks

22

Role of the Board of Role of the Board of DirectorsDirectors

Setting Tone at the TopSetting Tone at the Top Defining Business Defining Business

PhilosophyPhilosophy

33

Independence of BoardIndependence of Board Independent of the influence of Independent of the influence of

ManagementManagement Clearly know their responsibilities and Clearly know their responsibilities and

powers powers Focus on Policy Making and general Focus on Policy Making and general

direction direction No role in day to day affairsNo role in day to day affairs No conflict of interestNo conflict of interest Understand the bank’s risk profileUnderstand the bank’s risk profile

-- training programs for Board memberstraining programs for Board members

44

Board Sub-committeesBoard Sub-committees

Preferably comprising non-executive board Preferably comprising non-executive board members, in the areas of:members, in the areas of:– AuditAudit– Risk ManagementRisk Management– Human Resource Human Resource – CreditCredit– OthersOthers

With well defined objectives, authorities and With well defined objectives, authorities and tenuretenure

Without indulging in day to day affairsWithout indulging in day to day affairs Full board to review their performanceFull board to review their performance

55

Responsibilities of BoardResponsibilities of Board

Setting the:Setting the:– ObjectivesObjectives– Vision and Mission statementVision and Mission statement– Strategy & Business PlanStrategy & Business Plan

Providing oversight to ensure Providing oversight to ensure achievement of organizational objectives achievement of organizational objectives

-- within the legal and regulatory within the legal and regulatory framework framework and high business ethicsand high business ethics

Standing accountable to stakeholdersStanding accountable to stakeholders

66

ResponsibilitiesResponsibilities (Contd.)(Contd.)

Appointing key executives – based Appointing key executives – based on FPT criteriaon FPT criteria

Defining powers and responsibilities Defining powers and responsibilities of senior managementof senior management

Succession planning for key Succession planning for key positionspositions

Disclosing conflict of interestDisclosing conflict of interest Ensuring disclosure to promote Ensuring disclosure to promote

transparency and market disciplinetransparency and market discipline

77

Responsibilities – Responsibilities – Policy FrameworkPolicy Framework

Formulating policies :Formulating policies :– CreditCredit– Investments and Treasury ManagementInvestments and Treasury Management– Human ResourcesHuman Resources– Internal Audit and ControlInternal Audit and Control– ComplianceCompliance– Risk ManagementRisk Management– Other areasOther areas

Communication and complianceCommunication and compliance

88

Responsibilities – Internal Responsibilities – Internal AuditAudit

Creation of separate department of Creation of separate department of Internal Audit, with Internal Audit, with – Professional StaffProfessional Staff– Full Scope coverageFull Scope coverage– Audit Charter & ManualAudit Charter & Manual

Head of Internal Audit reporting to Head of Internal Audit reporting to the board or the Audit Committee the board or the Audit Committee

Appointment and remuneration of Appointment and remuneration of Head of Internal AuditHead of Internal Audit

99

Responsibilities - MISResponsibilities - MIS Ensuring existence of an effective Management Ensuring existence of an effective Management

Information SystemInformation System For keeping itself abreast withFor keeping itself abreast with

– ActivitiesActivities– Operating Performance & financial conditionOperating Performance & financial condition– Operating environmentOperating environment– Major Risks Major Risks

Evaluating Performance of the management - Evaluating Performance of the management - based on certain benchmarksbased on certain benchmarks

1010

Responsibilities – Board MeetingsResponsibilities – Board Meetings

At least quarterly, preferably more At least quarterly, preferably more frequentlyfrequently

Individual Directors to attend at Individual Directors to attend at least half of the meetings in a yearleast half of the meetings in a year

Information through agenda items Information through agenda items in advancein advance

Recording minutes of deliberations Recording minutes of deliberations in detailin detail

1111

Responsibilities - OthersResponsibilities - Others

Reviewing the effectiveness Reviewing the effectiveness of Internal Controls of Internal Controls

Strengthening Risk Strengthening Risk ManagementManagement

1212

Responsibilities - OthersResponsibilities - Others

Annual Financial Statements :Annual Financial Statements :

-- Coverage of Directors’ Coverage of Directors’ ReportReport

-- Statement on Internal Statement on Internal ControlsControls

-- Risk Management Risk Management FrameworkFramework

1313

Responsibilities - OthersResponsibilities - Others

IRAF ReportingIRAF Reporting Regulatory complianceRegulatory compliance Basel-II implementationBasel-II implementation

1414

Thank YouThank You