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Banking Sector.

RBI Governor Urges Banks to Prioritize Governance and Ethical Practices

Leave a Comment / By / Governance Community

RBI Governor Shaktikanta Das on Monday called upon private sector banks to bolster their internal governance frameworks and curb unethical practices. Speaking at the Conference of Directors of Private Sector Banks in Mumbai, Das emphasized the long-term risks of practices like mis-selling products and opening accounts without proper KYC verification. “While such practices may yield short-term gains, they ultimately expose banks to reputational damage, supervisory scrutiny, and financial penalties,” he noted, urging bank boards to lead the charge in ensuring ethical operations. Das highlighted the need for banks to carefully structure employee incentives to avoid encouraging unethical behaviors. He also pointed out that the Indian banking sector is at a juncture of both opportunities and challenges, with improving financial indicators reflecting strong efforts by bank management and boards. To maintain this momentum, the governor underscored the importance of leveraging strong fundamentals to build resilience and grow sustainably. “Good times are the best times to reinforce resilience and fortify defenses,” he remarked. The governor also touched upon emerging challenges posed by technological advancements, the rise of fintech, third-party dependencies, and climate change. He urged bank boards to act as guiding beacons in this dynamic environment, helping navigate risks while steering towards stable and sustainable growth. Das reaffirmed the RBI’s commitment to supporting the banking sector in its pursuit of innovation and resilience. He emphasized that a proactive approach to governance and ethics is crucial for fostering trust and stability in India’s rapidly evolving financial landscape. Source: CNBCTV 18 Photo Credit: CNBCTV 18

Employee Associations Urge Merger of RRBs with Sponsor Banks for Enhanced Efficiency

Leave a Comment / By / Human Resource Community

Bank employee associations have called on Union Finance Minister Nirmala Sitharaman to merge Regional Rural Banks (RRBs) with their respective sponsor banks. This move aims to ensure overall efficiency and viability in the banking sector. A joint statement from the All India Bank Officers’ Confederation and the All India Bank Employees Association, representing over 6 lakh bank employees, emphasized the need for this merger. “Competition among Public Sector Banks and RRBs is leading to the wastage of scarce financial resources by offering the same types of services,” the statement read. The associations argue that despite this competition, a significant portion of the rural population is not benefiting from modern, technology-driven banking products. RRBs were established under the RRB Act of 1976 with the capital provided by the Government of India, state governments, and sponsored banks. Currently, there are 43 RRBs sponsored by 12 scheduled commercial banks, operating around 22,000 branches, 30 crore deposit accounts, and 3 crore loan accounts across 702 districts. Ninety-two percent of RRB branches are located in rural and semi-urban areas, highlighting their importance in the rural banking ecosystem. The associations believe that merging RRBs with sponsor banks would ensure uniformity in the product range offered to customers, thus accelerating the growth of the rural economy and prioritizing sector lending. “Such integration will update the skills of RRB employees to modern banking practices and effectively address staff shortages in both RRBs and sponsor banks,” they added. Additionally, they noted that the salary structures and benefits of RRB employees are broadly similar to those in sponsor banks, which would facilitate a seamless integration. “The proactive step of merging RRBs with their respective sponsor banks will facilitate enhanced supervision, governance, and accountability, ensuring greater sustainability of the entire banking sector,” the statement concluded.

IDFC First Bank Shareholders Approve Merger with IDFC Ltd

Leave a Comment / By / Human Resource Community

IDFC First Bank shareholders have approved the merger of IDFC Limited with the bank, marking a significant step in the amalgamation process. The National Company Law Tribunal (NCLT) convened a meeting on May 17, 2024, to consider and approve the composite scheme of amalgamation involving IDFC Financial Holding Company merging into IDFC Limited, and subsequently, IDFC Limited merging into IDFC First Bank. In the approved reverse merger scheme, IDFC shareholders will receive 155 shares of IDFC First Bank for every 100 shares they hold in IDFC Limited. Both IDFC Ltd and IDFC First Bank shares have a face value of ₹10 each. The resolution was passed by the requisite majority, with over three-fourths in value of the equity shareholders voting in favor. Additionally, the scheme received overwhelming support from Non-Convertible Debenture (NCD) holders, with 99.99% voting in favor through remote e-voting and e-voting during the meeting. The Reserve Bank of India (RBI) had already given its nod for the reverse merger in December 2023. The merger was initially approved by the boards of IDFC Financial Holding Co. Ltd, IDFC Ltd, and IDFC First Bank in July 2023. Following the announcement, IDFC First Bank shares ended 0.26% higher at ₹77.44 apiece on the BSE on Saturday. This merger aims to streamline the corporate structure and enhance the operational efficiencies of the entities involved, potentially leading to better value creation for shareholders.