Finance Ministry Asks Public Sector Banks to Review Boards Performance and Monitor Actions of Top Management

The Finance Ministry has asked all public sector banks (PSBs) to carry out independent review of Boards’ Performance. The Ministry of Finance has asked government owned banks to conduct a third-party review of how their boards are performing. This step comes after recent issues of weak governance in some banks, which raised serious questions about whether their boards are doing enough to monitor top management.

Recently, several issues have been reported at various banks where top management has been found at fault. IndusInd Bank is facing serious questions about a big loss of nearly ₹2,000 crore related to its foreign exchange derivative transactions. Union Bank purchased nearly two lakh copies of Book of at a cost of ₹7.25 crore. Various questions were raised against Union Bank MD&CEO Ms. A Manimekhalai, related to this book purchase. Karnataka Bank CEO has also resigned from his post. As per reports, MD spent crores of rupees without approval by the board.

Due to these growing concerns, now the government has directed Banks to evaluate the performance of their boards and monitor the actions of top management.

A senior government official explained that because of a few governance concerns in the banking sector, PSBs have been directed to get their boards evaluated by independent experts. The goal is to assess important aspects of corporate governance, such as:

• How the board is structured and composed
• How effectively the board and its committees are functioning
• Whether the board is upholding ethics and compliance standards
• How well risks are being managed
• Whether the board is truly independent
• If the bank’s leadership is aligned with its overall vision and strategy

The review will also look into whether the board is properly overseeing the bank’s operations and making decisions in the best interest of stakeholders.

Major Banks Begin the Review Process

Some of the big PSBs like State Bank of India (SBI), Bank of Baroda, Punjab National Bank, Union Bank of India, and Central Bank of India have already started the evaluation process.

Other banks like UCO Bank, Indian Overseas Bank, Bank of India, Canara Bank, Punjab & Sind Bank, Indian Bank, and Bank of Maharashtra are expected to begin their reviews shortly.

These board evaluations are being carried out by reputed professional firms such as Deloitte Touche Tohmatsu India LLP and KPMG India Services LLP, according to the official.

Why is this important?

Evaluating how well the board of directors performs and closely monitoring top management is an important step in improving transparency and accountability in banks.

This kind of oversight is crucial because decisions made by top management have a direct impact on the bank’s performance and stability. By keeping a close check on their actions, banks can ensure that leadership is acting in the best interests of the institution, its customers, and stakeholders.

Regular performance reviews and proper governance practices help build trust, reduce risks, and support the long-term health of the banking system.