Work is in progress for developing the criteria for selecting independent directors, their appointment and removal, Injeti Srinivas, Secretary, Ministry of Corporate Affairs, tells Nayantara Rai of ET Now.
ET Now: Who is responsible for keeping an eye on governance in banks? A case in point is ICICI Bank?
The governance of a bank squarely falls in the domain of RBI, this is my understanding. If there is any deficiency in the functioning of the top management and that could jeopardise the interest of minority investors and public at large, then RBI will have to look at it and I am sure they are looking at it.
The Securities and Exchange Board of India (Sebi) is also looking at it.
Of course. If it is a listed company and there are shareholders, Sebi will also have to look at it. But I meant as a bank, RBI will have to look into it.
Are you not going to look at ICICI Bank as a corporate?
There are clearly laid-down mandates and as a bank primarily, RBI is the proper entity to look into it. If all the ministries start bouncing on an entity, it will be chaotic.
You are talking about the efficiency and the efficacy of the ICICI board and the independent directors. LIC is a board member. You also have got a central government bureaucrat as a board member. They were absent during the board meetings which gave a clean chit to Chanda Kochhar. You all have the whistleblower report but the government has done nothing!
I do not think we can reach any conclusion with respect to any particular case — be it even ICICI. I am talking about the overall architecture, how a particular board is functioning, if there is an evaluation mechanism. You have a regulator. For a bank, RBI is the regulator and how effective the management is and how effectively they are functioning is well within the mandate of the Reserve Bank of India.
But the central governments bureaucrat, who was the representative of the Government of India on ICICI board, skipped the meetings. What kind of a message is the government sending out on corporate governance?
I will not be in a position to comment on whether he could have taken leave of absence for some valid reason.
As a secretary of the corporate affairs ministry, do you think that perhaps we need to strengthen the Whistleblower Act? Look at the Infosys case, look at the ICICI case, do you think perhaps there is a case for that now?
The only thing we will have to see is that they function effectively. The institution of independent directors is very critical. It basically occupies the centrestage as far as corporate governance goes. Independent directors are supposed to protect the interest of the non-promoter group. We will have to see how independent the independent directors are, what would be the minimum qualifications an independent director would have to have and what sort of capacity he possesses.
Work is in progress with respect to developing strong criteria for selection of independent directors, the manner in which they will be selected, their appointment, their removal — all these aspects will have to be looked at as well as their accountability.
Fortis is the other one that we hear about.
What about Fortis?
Is the government examining Fortis? The resignation of the auditor, the alleged siphoning of funds, its sale, how the overall of the company board is changing in the midst of the company sale?
There are certain issues which the corporate affairs ministry through its organisations is definitely looking into and that is in process. The findings will determine what action you need to take.