Centre to soon appoint independent directors in PSBs, financial institutions

Since many listed public sector banks and some financial institutions are short of the mandated number of directors, it is in violation of the Companies Act as well as SEBI listing norms.

The central government is expected soon to approve a list of independent directors to be appointed on boards of various public sector banks and financial institutions. The appointments are meant to ensure compliance with regulatory norms of corporate governance.

Public sector space has several vacancies at the independent director level, which is in contravention of regulatory norms, government sources told PTI. Considering this, a list of eligible persons to be appointed as independent directors has been sent to the Prime Minister's Office and it will take a final call soon, they added.

Appointments Committee of the Cabinet (ACC), which is headed by Prime Minister Narendra Modi, makes all high-level appointments in government department and bodies, including that of independent directors.

As per the Companies Act 2013, every listed public company shall have at least one-third of the total number of directors as independent directors.

Since many listed public sector banks (PSBs) and some financial institutions (FIs) are short of the mandated number of directors, it is in violation of the Companies Act as well as listing norms of market regulator Securities and Exchange Board of India (Sebi), the sources said.

For example, some of the banks like Indian Overseas Bank, Indian Bank and UCO Bank are in non-compliance of independent director norms.

Except for State Bank of India (SBI) and Bank of Baroda, the position of chairman in most of the state-owned banks is vacant. The posts of workman director and officer director, representing the employees and officers of the banks, respectively, have been vacant for the past 7 years.

There are 12 public sector banks, four public sector general insurance companies, and one life insurance firm. Besides, there are some specialised insurance players like Agriculture Insurance Company of India Ltd.

The Boards of Directors of nationalised banks are guided by the provisions of Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and Nationalised Banks (Management and Miscellaneous Provisions ) Scheme, 1970.