What changed
RBI has examined corporate governance aspects of ADR/GDR issuances and now mandates that banks furnish a copy of the Depository Agreement to RBI. Banks must also undertake that they will not recognize any voting by the depository that violates the agreement, and that no changes to the agreement will be made without prior RBI approval.
What it means for you
This ensures depositories cannot interfere in bank management through voting rights, strengthening corporate governance. Banks must now proactively share these agreements and seek RBI's nod for any amendments, adding a compliance layer to ADR/GDR fundraising.
What you must do
- Submit a copy of the Depository Agreement to RBI immediately if you have issued ADRs/GDRs.
- Provide a written undertaking to RBI that you will not recognize depository voting that contravenes the agreement.
- Ensure no changes to the Depository Agreement are made without prior RBI approval.
- Review existing agreements to confirm compliance with these new requirements.
Who it affects
All scheduled commercial banks (excluding RRBs) that have issued or plan to issue ADRs/GDRs
Why is RBI asking for the Depository Agreement?
To examine corporate governance aspects and ensure depositories do not interfere in bank management through voting rights.
What happens if a depository votes against the agreement?
Banks must not recognize such voting and must give an undertaking to RBI to this effect.
Can we modify the Depository Agreement later?
No changes are allowed without prior approval from RBI.