Month: April 2021

These Banks Are Recommended A ‘Buy’ For Short Term Gains

Personal Finance

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Investment

oi-Roshni Agarwal

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After ending weak in the previous week on global strong cues which indicated that recovery is at a reasonable pace, Indian indices could sustain some gains on Monday.
Now as per experts, the markets could continue to witness volatility unless Covid 19 threat continues to exists:

These Banks Are Recommended A ‘Buy' For Short Term Gains

These Banks Are Recommended A ‘Buy’ For Short Term Gains

Now there is a advised to adopt a stock-specific approach and look at banking stocks as the sector is in oversold territory. Experts said banks with strong business outlook can provide a 3-5 percent upside in the short term. There is advised a ‘buy’ on stocks of SBI, ICICI Bank and Axis Bank once the market opens today (april 27, 2021).

What does oversold mean in a stock market?

It is a state when the price of a stock crashes too soon and quickly. As per Investopedia, it refers to a condition where an asset has traded lower in price and has the potential of a price bounce. An oversold condition can last for a long time, and therefore being oversold doesn’t mean a price rally will come soon, or at all. Many technical indicators identify oversold and overbought levels.

“These banking stocks have strong fundamentals and in immediate short-term they can showcase 3-5 per cent upside movement”, advises Avinash Gorakshkar, Head of research at Profitmart Securities said.

SBI, ICICI Bank and Axis Bank have strong corporate business outlook and they are expected to improve fast on the NPA front. So, these three banking stocks are expected to show sharp upside move in short-term”, he added.

With regards to SBI “Giving important levels for the stock investors in regard to SBI stocks Ravi Singhal of GCL securities said, “One can buy SBI shares at current market price for short-term targets of Rs. 375, Rs. 400 and Rs. 425 maintaining stop loss at Rs. 310.”

In respect of Axis Bank, buy is recommended at current price levels with a target price of Rs. 725 and Rs. 770.He advised investors to keep accumulating Axis Bank stocks till it is above Rs. 620. Singhal also advised investors to strictly maintain the stop loss at Rs. 620 while taking buy position in Axis Bank shares.
For stock market investors interested in ICICI Bank shares, Singhal advised them to buy ICICI bank stocks for the short-term target of Rs. 770.

GoodReturns.in



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RBI article calls for monitoring movement of funds between banks and ARCs

Banking & Finance

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It may be necessary to monitor if there is a circuitous movement of funds between banks and Asset Reconstruction Companies (ARCs), according to an article in the Reserve Bank of India’s latest monthly bulletin.

This observation comes in the backdrop of banks being not just major shareholders of and lenders to ARCs but also sellers of non-performing assets (NPAs) to them, it added.

Attracting ‘new money’ will be a challenge for the ARC

A movement of this kind can have implications for the genuine sale of NPAs and the overall growth of the ARC industry, said RBI officials Amarnath Yadav and Pallavi Chavan from the Department of Supervision, in the article.

The authors emphasised that given the private character of ARCs, they have tended to rely heavily on borrowings, particularly from banks, as a major source of their funds.

The article underscored that the capital base of ARCs is made up largely by domestic sources, particularly banks and financial institutions, with foreign sources remaining weak.

Being private sector entities, the key shareholders of ARCs are banks (29 per cent) and other financial institutions (37 per cent).

RBI set up 6-member panel to review working of ARCs

In order to boost their capital base, ARCs were allowed to accept 100 per cent of foreign direct investment (FDI) through the automatic route in 2016.

Notwithstanding the liberalisation relating to FDI, foreign entities account for a small portion (10 per cent) of the total capital of ARCs, the authors said.

Highly concentrated business

Although the number of ARCs has increased over time, their business has remained highly concentrated.

The authors assessed that of the total assets under management (AUM), about 62 per cent and 76 per cent was held by the top three and top five ARCs in March 2020, respectively.

Furthermore, in terms of the capital base of the industry, 62 per cent was held by the top three ARCs; the corresponding share was 67 per cent for the top five ARCs.

When it comes to acquisition of assets by ARCs, over time, although the average acquisition ratio (acquisition cost to book value of assets) has gradually risen, it remains in the range of 30-35 per cent, the article said.

There is a wide variation in the acquisition ratio also across sectors, it added.

Iron and steel, and power sectors are the two sectors having a relatively high concentration in acquired assets, as they are also ridden with NPAs. The acquisition ratio in these two sectors has been much lower (roughly about 45 per cent).

By contrast, hospitality (acquisition ratio: about 85 per cent) and real estate (about 70 per cent) account for a smaller share in total assets acquired, but their acquisition ratio has been relatively high.

Limited trading of SRs

Going by the resolution methods, ARCs prefer the method of rescheduling of the payment obligations (32 per cent as of March 2020) over other methods — enforcement of security interest (26.6 per cent); settlement of dues of borrower (26 per cent); by sale of business (13.9 per cent); and taking possession of assets (1.5 per cent).

The authors said banks continue to hold close to 70 per cent of the total Security Receipts (SRs) despite a change in the regulation disincentivising them from holding SRs above a specific threshold.

The authors observed that dominance of selling banks in holding SRs has often been described as a reason for limited secondary trading of SRs, despite the regulatory push to incentivise listing and trading of these instruments.

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Reserve Bank of India – Press Releases

Press Releases

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April 14, 2015





Dear All




Welcome to the refurbished site of the Reserve Bank of India.





The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.





With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.




The site can be accessed through most browsers and devices; it also meets accessibility standards.



Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.



Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.



Thank you for your continued support.




Department of Communication

Reserve Bank of India


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ICICI Bank pushes on retail as other lenders slow down, BFSI News, ET BFSI

Banking & Finance

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– By Shashank Singhal

ICICI Bank Ltd. reported strong fourth-quarter earnings, with revenues and core income increasing and asset quality remaining stable driven by loan growth and higher profitability.

Credit Growth:

The Total advances of the bank increased by 14% year-on-year to 733,729 crores on March 31, 2021 from ` 645,290 crore on March 31, 2020. Bank’s credit growth was mainly driven by retail segment. On March 31, 2021, the retail loan portfolio had grown by 20% year on year and 7% sequentially which has been double the system retail loan growth. Retail accounted for 67% of the overall portfolio. Retail mortgages grew by 22% year on year being the largest incremental contributor to growth. Banks continue to push for higher retail loan growth. Disbursements to higher rated corporates and public sector undertakings (PSUs) across various sectors drove growth in the performing domestic corporate portfolio by about 13% year on year.

Among other retail segments, business loans increased by 40% year over year, while rural loans (which include 50% Jewel loans) increased by 27% year over year. The book in the CV, two-wheeler, and credit card segments increased Quarter on quarter, but the book in the CV, two-wheeler, and credit card segments remained flat.

Bank’s retail growth can be attributed to digitization. Digital initiative such as ‘EMI @ Internet Banking’ which allows preapproved customers to convert their high value transactions into instant EMIs at the time of purchase on their retail internet banking platform and graining traction in the cards business through digital platform boosted the retail growth. The growth was also aided by the bank’s expansion of footprint in tier 2, 3 and 4 cities and low interest rates.

Slippages

According to CLSA, ICICI Bank’s slippage at Rs 5,500 crore (0.75 per cent of loans) was a positive surprise. Retail slippage increased by less than 2x to 2.4 per cent in FY21 vs 1.4 per cent in FY20 which, the brokerage believes, is manageable given the pandemic which indicates that Bank has been cautious rather aggressive in lending retail loans.

Asset Quality

ICICI Bank’s gross non-performing asset ratio stood at 4.96% compared with 5.42% in the October-December quarter while the net NPA ratio declined to 1.14% on March 31, 2021 from 1.26% (on a proforma basis on December 31, 2020) and 1.41% on March 31, 2020.Bank maintains healthy specific provision coverage ratio of 78% of NPAs and contingent buffer at 1% of loans.

HDFC slows down on Retail

HDFC Bank reported 14% year-on-year growth in domestic advances on 31st March 2020 mainly driven by growth in wholesale loans which grew by 21.7% from last year while as per regulatory [Basel 2] segment classification, domestic retail loans grew only by 6.7%. Wholesale loans now form 53% of the total loan book. Retail loans accounted for 47% compared to 67% of ICICI Bank showing different target segments of the Banks.

For the first time in many years, ICICI Bank’s loan growth exceeded that of HDFC Bank. The Overall domestic loan growth of 18% year-on-year (6% quarter-on-quarter) of ICICI has been 3x that of system loan growth and 400 basis points above HDFC Bank.

Banks cautious on Retail loans

Amid the uncertainty provided by the pandemic other lenders such as Kotak has also cut down on the retail front. Banks are taking cautious stance on extending credit to avoid a spike in asset quality issues. Banks are falling back on the secure options.

ICICI Securities in a note recently said, “Kotak Mahindra Bank’s management had highlighted that unsecured retail and CV (bus operator segment) portfolios were reflecting disproportionate stress. Beside this, MTM gain on investment portfolio, cost agility and low cost deposit based will cushion earnings impact.”



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Reserve Bank of India – Press Releases

Press Releases

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(Amount in ₹ crore, Rate in Per cent)
  Volume
(One Leg)		 Weighted
Average Rate 		Range
A. Overnight Segment (I+II+III+IV) 4,38,566.63 3.21 0.01-3.50
     I. Call Money 10,905.75 3.20 1.90-3.50
     II. Triparty Repo 3,19,470.00 3.23 3.15-3.38
     III. Market Repo 1,08,190.88 3.14 0.01-3.40
     IV. Repo in Corporate Bond 0.00   –
B. Term Segment      
     I. Notice Money** 637.30 3.24 2.50-3.40
     II. Term Money@@ 376.00 – 2.70-3.40
     III. Triparty Repo 1,577.65 3.16 3.14-3.20
     IV. Market Repo 449.65 3.35 3.35-3.35
     V. Repo in Corporate Bond 0.00 – –
  Auction Date Tenor (Days) Maturity Date Amount Current Rate /
Cut off Rate
C. Liquidity Adjustment Facility (LAF) & Marginal Standing Facility (MSF)
I. Today’s Operations
1. Fixed Rate          
     (i) Repo          
     (ii) Reverse Repo Mon, 26/04/2021 1 Tue, 27/04/2021 4,18,620.00 3.35
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo          
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo – – – – –
3. MSF Mon, 26/04/2021 1 Tue, 27/04/2021 121.00 4.25
4. Long-Term Repo Operations –   –   –
5. Targeted Long Term Repo Operations – – – – –
6. Targeted Long Term Repo Operations 2.0 – – – – –
7. Net liquidity injected from today’s operations
[injection (+)/absorption (-)]*		       -4,18,499.00  
II. Outstanding Operations
1. Fixed Rate          
     (i) Repo          
     (ii) Reverse Repo          
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo Fri, 23/04/2021 14 Fri, 07/05/2021 2,00,017.00 3.47
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo          
3. MSF          
4. Long-Term Repo Operations# Mon, 17/02/2020 1095 Thu, 16/02/2023 499.00 5.15
  Mon, 02/03/2020 1094 Wed, 01/03/2023 253.00 5.15
  Mon, 09/03/2020 1093 Tue, 07/03/2023 484.00 5.15
  Wed, 18/03/2020 1094 Fri, 17/03/2023 294.00 5.15
5. Targeted Long Term Repo Operations^ Fri, 27/03/2020 1092 Fri, 24/03/2023 12,236.00 4.40
  Fri, 03/04/2020 1095 Mon, 03/04/2023 16,925.00 4.40
  Thu, 09/04/2020 1093 Fri, 07/04/2023 18,042.00 4.40
  Fri, 17/04/2020 1091 Thu, 13/04/2023 20,399.00 4.40
6. Targeted Long Term Repo Operations 2.0^ Thu, 23/04/2020 1093 Fri, 21/04/2023 7,950.00 4.40
7. On Tap Targeted Long Term Repo Operations€ Mon, 22/03/2021 1095 Thu, 21/03/2024 5,000.00 4.00
D. Standing Liquidity Facility (SLF) Availed from RBI$       27,202.06  
E. Net liquidity injected from outstanding operations [injection (+)/absorption (-)]*     -90,732.94  
F. Net liquidity injected (outstanding including today’s operations) [injection (+)/absorption (-)]*     -5,09,231.94  
G. Cash Reserves Position of Scheduled Commercial Banks
     (i) Cash balances with RBI as on 26/04/2021 5,17,667.40  
     (ii) Average daily cash reserve requirement for the fortnight ending 07/05/2021 5,38,082.00  
H. Government of India Surplus Cash Balance Reckoned for Auction as on¥ 26/04/2021 0.00  
I. Net durable liquidity [surplus (+)/deficit (-)] as on 09/04/2021 7,12,322.00  
@ Based on Reserve Bank of India (RBI) / Clearing Corporation of India Limited (CCIL).
– Not Applicable / No Transaction.
** Relates to uncollateralized transactions of 2 to 14 days tenor.
@@ Relates to uncollateralized transactions of 15 days to one year tenor.
$ Includes refinance facilities extended by RBI.
& As per the Press Release No. 2019-2020/1900 dated February 06, 2020.
* Net liquidity is calculated as Repo+MSF+SLF-Reverse Repo.
# As per the Press Release No. 2020-2021/287 dated September 04, 2020.
^ As per the Press Release No. 2020-2021/605 dated November 06, 2020.
€ As per the Press Release No. 2020-2021/520 dated October 21, 2020, Press Release No. 2020-2021/763 dated December 11, 2020 and Press Release No. 2020-2021/1057 dated February 05, 2021.
¥ As per the Press Release No. 2014-2015/1971 dated March 19, 2015.
Rupambara
Director    
Press Release : 2021-2022/114

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HSBC bets on digital growth in India as Citi, FirstRand wind up, BFSI News, ET BFSI

Banking & Finance

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Amid Citibank and FirstRand Bank shutting down India operations, HSBC, one of the biggest foreign bank in India stays bullish.

The bank which posted $1 billion in profits in 12019 and 2020, has retained its growth forecasts for India despite the second wave of Covid.

While the bank rationalised its branch operations in India a few years earlier it grew business through digital channels. It sees a substantial part of its banking activities eventually moving towards digital, self-serve models.

HSBC’s number of customers has increased 37% since December 2017 to 10.5 lakh in December 2020. The bank’s pre-tax profits from India have been over $1 billion for 2019 and 2020.

Local linkage

HSBC has the advantage of having a strong presence in countries where the Indian diaspora is predominant. This includes the Middle East, Southeast Asia, Australia, Canada and the US. As a result, it has been able to target persons of Indian origin as well as Indians looking to invest in these markets or move there for studies.

It sees government measures like reduction in the corporate tax rate, production-linked incentives and the disinvestment plan pushing inward investment in India. Transaction banking, covering cash management, custody, trade and foreign exchange is the focus area for the bank. It also sees a tremendous opportunity for banks to partner with fintech in specific segments.

Despite the second wave, HSBC research has retained its growth forecast of 11.2% for FY22.

Focus on digitalisation

Recently the bank has partnered with Google Pay for tokenisation on its credit card portfolio.

The move is in line with the bank’s ongoing endeavour towards enhanced security and convenience for its card holders.

HSBC India on Thursday announced that it has collaborated with Google Pay (GPay) and VISA to enable secured tokenisation on its credit cards.

“This new feature will enable HSBC Credit Card customers to link their card to GPay and use it as a payment option to securely and digitally transact using their mobile phones – online and at merchant stores,” it said in a statement, adding that the feature is free but optional for its credit card users.

Recently, HSBC along with Tata Steel successfully execute a blockchain-enabled, paperless trade transaction – a global first for the steel industry. The live trade finance transaction involved the export of steel by Tata Steel, India to Universal Tube & Plastic Industries, UAE.

The end-to-end paperless trade transaction, executed over the Contour platform was made possible by a unique collaboration pivoted by Tata Steel across the spectrum over the Contour and essDOCS platforms. The Letter of Credit (LC) was issued by HSBC UAE for Universal Tube & Plastic Industries, UAE (importer) with HSBC India as the advising and negotiating bank for Tata Steel, India (exporter).



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Net profit jumps 110% to Rs 175 cr; revenue declines to Rs 2,309 cr, BFSI News, ET BFSI

Personal Finance

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SBI Cards and Payment Services on Monday reported a 110 per cent rise in net profit at Rs 175 crore for the quarter ended March 2021.

The credit card company, promoted by the country’s largest lender SBI, had posted a net profit of Rs 84 crore in the corresponding January-March period of the preceding fiscal year 2019-20.

The company, which operates under the brand name SBI Card, reported decline in revenue to Rs 2,309 crore during the fourth quarter as against Rs 2,433 crore in same period a year ago, it said in a regulatory filing.

Total income too dropped to Rs 2,468 crore from Rs 2,510 crore in the same quarter a year ago.

The total expenses were lower at Rs 2,234 crore as compared to Rs 2,398 crore earlier.

For the full year 2020-21, net profit slipped by 21 per cent to Rs 985 crore from Rs 1,245 crore in preceding fiscal.

With regard to asset quality, the company registered a deterioration with gross non performing assets (NPAs) more than doubling to 4.99 per cent at the end of March 2021, as compared to 2.01 per cent at March 2020.

Similarly, net non-performing assets rose to 1.15 per cent as against 0.67 per cent earlier.

As of March 31, 2021, the company’s capital-to-risk weighted assets ratio (CRAR) was 24.8 per cent compared to 22.4 per cent last year.

During the quarter ended March 2020, the company had come up with its Initial Public Offering (IPO) and was listed on BSE and NSE.



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RBI paper, BFSI News, ET BFSI

Banking & Finance

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Introduction of a bad bank may help “shape the operations” of the existing asset reconstruction companies (ARCs), an RBI paper said on Monday, noting that a sizable bulk of assets bought by such entities have not been resolved for a long time. The paper, published in the central bank’s monthly bulletin for April, also flagged risks of an excessive reliance on banks by the ARC industry.

It said banks supply non performing assets (NPAs) to the ARCs, hold shareholding in these entities and also lend to them, which makes it necessary to monitor if there is a “circuitous movement of funds between banks and these institutions (ARCs)”.

In her Budget speech for FY22, Finance Minister Nirmala Sitharaman had declared that a new ARC will be created to hold the sour assets of the state-run lenders and resolve such assets professionally.

“About 42 per cent of the outstanding SRs (security receipts) as on March 2020 were more than five years of age and would have to be redeemed over the next four years to avoid write-offs,” the paper said, pointing out at the difficulties being faced by the current set of ARCs in resolving the stress.

While resolving a case, ARCs pay a minor portion in cash to the selling bank while the rest is SRs to be paid over a time.

“Going forward, the introduction of a new asset reconstruction company for addressing the NPAs of public sector banks may also shape the operations of the existing ARCs,” the RBI paper said.

It added that there is a definite scope for the entry of a “well-capitalised and well-designed entity” in the Indian ARC industry and such a body will strengthen the asset resolution mechanism further.

It cited global experiences to lay down the necessary features of the new ARC announced by the government.

It advocated that the new ARC or the bad bank should have a narrow mandate such as resolving NPAs with clearly defined goals, a sunset clause defining their lifespan, supportive legal infrastructure involving bankruptcy and private property laws, backing of a strong political will to recognise problem loans, and a commercial focus including in governance, transparency, and disclosure requirements.

The paper said while proactive asset recognition is important for a correct assessment of the health of the banking system, it needs to be followed by effective asset resolution and recovery by banks.

The absence of an effective resolution and recovery mechanism can discourage recognition of NPAs by banks in the first place. The lack of recourse to timely recovery can also deteriorate the economic value of assets adding to the losses incurred by banks over time, it said.

The regulatory changes by the Reserve Bank have been broadly geared towards strengthening the ARC industry, ensuring genuine sale of NPAs by banks, enhancing the involvement of ARCs in the process of resolution and deepening the market for SRs, it said.

However, it noted that there has been a concentration in the industry in terms of AUM and SRs issued, and net owned funds.

Secondly, despite the regulatory push to broaden, and thereby enhance, the capital base of these companies, they have remained reliant primarily on domestic sources of capital, particularly banks.



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RBI to conduct customer satisfaction survey on bank mergers, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India (RBI) has decided to conduct a customer satisfaction survey to find out the impact of the recent mergers of state-owned banks on banking services being availed by individuals.

Among other things, the respondents will be asked whether the merger was positive from the point of customer services. The choice before the customer will be to tick one of the following options — strongly agree; agree; neutral; disagree; or strongly disagree.

The proposed survey will cover a total of 20,000 respondents from 21 states, including Uttar Pradesh, Maharashtra, West Bengal, Tamil Nadu, Bihar, Karnataka, Madhya Pradesh, and Gujarat. In all, there will be 22 questions.

Of the 22, a set of four questions has been drafted separately for assessing customer service and grievance redress issues of customers of branches of banks that have been merged with other banks in the year 2019 and 2020.

Among public sector banks, Dena Bank and Vijaya Bank were merged with Bank of Baroda; Oriental Bank of Commerce and United Bank of India with Punjab National Bank; Syndicate Bank with Canara Bank; Allahabad Bank with Indian Bank; Andhra Bank and Corporation Bank with Union Bank of India.

Also, Lakshmi Vilas Bank was merged with DBS Bank.

The questions related to mergers are: ‘I did not face any problem in availing services after the merger’; ‘I faced problems in the following product(s)/service(s)/area(s)’; and ‘The nature of problem I faced in the product(s)/service(s)/area(s)’.

The participants will also be asked: “overall, the merger has been positive from customer service perspective”; and options against this are ‘strongly agree’; ‘agree’; ‘neutral’; ‘disagree’; and ‘strongly disagree’.

While inviting quotations for conducting the ‘Bank Customers’ Satisfaction Survey’ from survey agencies, the central bank said the approved vendor will be required to conduct interview over phone with recording of customers of bank branches falling in identified states.

The RBI will provide the contact number of the customers of bank branches selected from the 21 states. The selected agency will have to complete the survey work and submit the report to the RBI by June 22, 2021.

Request for quotations (RFQ) document said the questions have been framed to capture the customer’s experience and perception of the grievance redress mechanism of his/her bank. It is also for awareness about the grievance redressal mechanism of the bank and the banking ombudsman.



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Tenure of private bank chiefs must end in 15 years: RBI

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The fixed remuneration for an NED other than the chair of the board will be capped at Rs 20 lakh per annum.

The post of MD & CEO of a private bank cannot be held by the same individual for more than 15 years at a stretch, the Reserve Bank of India (RBI) said on Monday in a set of instructions for banks. In case of a promoter-CEO, the tenure will be capped at 12 years.

RBI did clarify, though, that in the interest of a smooth transition to the new requirements, incumbents who have already completed the 12/15-year tenure as bank chiefs will be allowed to complete their current term. Uday Kotak, promoter of Kotak Mahindra Bank, is at present the longest-serving chief of a bank, having assumed charge at the time of the bank’s establishment in 2003. In December, the RBI had approved Kotak’s reappointment as MD & CEO for a three-year term beginning January 1, 2021. Earlier, in October 2020, Aditya Puri stepped down from the MD’s role at HDFC Bank after having held it for over 25 years.

“Subject to the statutory approvals required from time to time, the post of the MD & CEO or WTD (whole-time director) cannot be held by the same incumbent for more than 15 years. Thereafter, the individual will be eligible for re-appointment as MD & CEO or WTD in the same bank, if considered necessary and desirable by the board, after a minimum gap of three years, subject to meeting other conditions,” RBI said in a notification. During this three-year cooling period, the individual shall not be appointed or associated with the bank or its group entities in any capacity, either directly or indirectly.

The existing norms on the upper age limit for MD & CEO and WTDs in private sector banks would continue and no person will be allowed to hold these posts beyond the age of 70 years. Within the overall limit of 70 years, as part of their internal policy, individual banks’ boards are free to prescribe a lower retirement age for the WTDs, including the MD & CEO.

A promoter who is also MD & CEO or a WTD may be allowed to continue up to 15 years only in extraordinary circumstances and at the sole discretion of the RBI. “While examining the matter of re-appointment of such MD & CEOs or WTDs within the 12/15 years period, the level of progress and adherence to the milestones for dilution of promoters’ shareholding in the bank shall also be factored in by the Reserve Bank,” the notification said.

Banks have been permitted to comply with these instructions by October 1, 2021, even though the notification takes immediate effect. The chair of the board who is not an independent director on the date of issue of the circular shall be allowed to complete the current term as chair as already approved by the RBI. Banks with MD & CEOs or WTDs who have already completed 12/15 years as MD & CEO or WTD on the date these instructions come into effect, shall be allowed to complete their current term.

In addition to sitting fees and expenses related to attending meetings of the board, banks will be allowed to provide for payment of compensation to non executive directors (NEDs) in the form of a fixed remuneration. The fixed remuneration for an NED other than the chair of the board will be capped at Rs 20 lakh per annum.

The upper age limit for NEDs, including the chair of the board, shall be 75 years. The total tenure of an NED, continuously or otherwise, on the board of a bank, shall not exceed eight years. After completing eight years on the board of a bank the person may be considered for re-appointment only after a minimum gap of three years.

The board shall constitute a nomination and remuneration committee (NRC) made up of only NEDs and a risk management committee with a majority of NEDs. At least half of the members attending the meeting of the risk management committee shall be independent directors, of which at least one member shall have professional expertise in risk management. The chair of the board may be a member of this committee only if they have the requisite risk management expertise. The risk management committee shall meet at least once in each quarter.

A bank’s audit committee shall be constituted with only NEDs, with the chair of the board not being one of them. At least two-thirds of the members attending a meeting of the audit committee must be independent directors and it shall meet at least once in a quarter. The meetings of the audit committee shall be chaired by an independent director who does not chair any other committee of the board. The chair of the audit committee will also not be a member of any committee which has a mandate of sanctioning credit exposures. All members should have the ability to understand all financial statements and at least one member shall have professional expertise in financial accounting or financial management.

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