Role of Board of Directors in Strengthening Corporate Governance in Banks

Role of the Board of Directors Setting Tone at the Top Defining Business Philosophy

Independence of Board Independent of the influence of Management Clearly know their responsibilities and powers Focus on Policy Making and general direction No role in day to day affairs No conflict of interest Understand the bank’s risk profile - training programs for Board members

Board Sub-committees Preferably comprising non-executive board members, in the areas of: Audit Risk Management Human Resource Credit Others With well defined objectives, authorities and tenure Without indulging in day to day affairs Full board to review their performance

Responsibilities of Board Setting the: Objectives Vision and Mission statement Strategy & Business Plan Providing oversight to ensure achievement of organizational objectives - within the legal and regulatory framework and high business ethics Standing accountable to stakeholders

Responsibilities (Contd.) Appointing key executives – based on FPT criteria Defining powers and responsibilities of senior management Succession planning for key positions Disclosing conflict of interest Ensuring disclosure to promote transparency and market discipline

Responsibilities – Policy Framework Formulating policies : Credit Investments and Treasury Management Human Resources Internal Audit and Control Compliance Risk Management Other areas Communication and compliance

Responsibilities – Internal Audit Creation of separate department of Internal Audit, with Professional Staff Full Scope coverage Audit Charter & Manual Head of Internal Audit reporting to the board or the Audit Committee Appointment and remuneration of Head of Internal Audit

Responsibilities - MIS Ensuring existence of an effective Management Information System For keeping itself abreast with Activities Operating Performance & financial condition Operating environment Major Risks Evaluating Performance of the management - based on certain benchmarks

Responsibilities – Board Meetings At least quarterly, preferably more frequently Individual Directors to attend at least half of the meetings in a year Information through agenda items in advance Recording minutes of deliberations in detail

Responsibilities - Others Reviewing the effectiveness of Internal Controls Strengthening Risk Management

Responsibilities - Others Annual Financial Statements : - Coverage of Directors’ Report - Statement on Internal Controls - Risk Management Framework

Responsibilities - Others IRAF Reporting Regulatory compliance Basel-II implementation

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