Govt should restrict role in banks, FIs to boards: RBI

The Reserve Bank of India (RBI) on Thursday expressed concern over the government occasionally exercising its ownership rights in banks and financial institutions through channels outside of their boards, and asked it to show exemplary corporate governance.

The Reserve Bank of India (RBI) on Thursday expressed concern over the government occasionally exercising its ownership rights in banks and financial institutions through channels outside of their boards, and asked it to show exemplary corporate governance.

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“Occasionally there are concerns over the government exercising its ownership rights not through the established channel, which is the board mechanism, but outside of board,” RBI governor D Subbarao said at the 30th foundation day function of Nabard. “I don’t think that it is a good example of good corporate governance,” he said.

The government owns majority stake in 21 banks, including State Bank of India. Besides, it has majority ownership in many financial institutions.

“One thing for the government could be to show exemplary behaviour of corporate governance and exercise their ownership rights through the board,” he said.