Fit and Proper Criteria for Elected Directors at SBI Associate Banks

RBI/2007-2008/184 DBOD. No. BC.No. 50/29.39.001/2007-08 November 14, 2007 The Managing Directors of all the Associate Banks of State Bank of India Dear Sir, ‘Fit and proper’ criteria for elected directors   on the boards of Associate Banks of SBI It has been decided to lay down specific ‘fit and proper’ criteria to be fulfilled by the persons being elected as directors on the Boards of Associate Banks of State Bank of India under the provisions of Section 25(1)(d) of State Bank of India (Subsidiary Banks) Act, 1959 (as amended in 2007). The authority, manner/procedure and criteria for deciding the ‘fit and proper’ status etc. are as under: (a) Authority : All the Associate Banks of State Bank of India are required to constitute a 'nomination committee' consisting of a minimum of three directors (all independent/non-executive directors) from amongst the Board of Directors. The Board of Directors should also nominate one among them as Chairman of the nomination committee. The quorum required is three, including the Chairman. In case of absence of any member already nominated, the board of directors may nominate any other independent director in his place for the ensuing meeting. At the time of constituting the nomination committee the board can decide on its tenure. (b) Manner and procedure : The nomination committee should undertake a process of due diligence to determine the ‘fit and proper’ status of existing elected directors/the person to be elected as a director under Sec 25(1)(d) of the Act ibid. For this purpose, the banks should obtain necessary information and declaration, in the format enclosed ( Annexure-1 ), from the existing elected directors/persons, who file their nominations for election. The nomination committee should meet before the last date of acceptance of nominations in case of candidate to be elected and decide whether or not the person's candidature should be accepted based on the criteria mentioned below. The committee's discussions should be properly recorded as formal minutes of the meeting and the voting if done should also be noted in case of both existing and proposed Directors. Based on the information provided in the signed declaration, Nomination Committee should decide on the acceptance or otherwise of the candidate and may make references, where considered necessary to the appropriate authority/persons, to ensure their compliance with the requirements indicated. (c) Criteria:  The nomination committee should determine the ‘fit and proper’ status of the existing elected directors/proposed candidates based on the broad criteria as mentioned hereunder: (i) Educational qualification (ii) Experience and field of expertise (iii) Track record and integrity (The above list is only illustrative and not exhaustive). The Nomination Committee should see whether the non-adherence to any of the above criteria would hamper the existing elected director/proposed candidate from discharging the duties as a director on the Board of the bank. Further, the candidate coming to the adverse notice of any authority/regulatory agency or insolvency or default of any loan from any bank or financial institution would make the candidate unfit and improper to be a director on the Board of a bank. (d) Other matters:  It is desirable that the board ensures, in the public interest, that the elected directors execute the deed of covenants (copy enclosed for ready reference –  Annexure-2 ) as recommended by the Dr Ganguly Group vide our circular DBOD.No.BC.116/08.139.001/2001-02 dated 20th June 2002 and also every year as on 31st March. 2.It is also mandatory that all the elected directors must furnish a simple declaration every year as on 31st March that the information already provided by them has not undergone any change and where there is any change, requisite details are furnished by the directors forthwith. If there are any significant changes, the nomination committee should undertake the due diligence exercise afresh and examine the ‘fit and proper’ status of the director. 3. The process of determining the ‘fit and proper’ status in respect of existing elected directors on the Board of the bank should be completed at the earliest. 4. Accordingly, Notification  DBOD.BC.No.49/29.39.001/2007-08 dated 14th November, 2007  issued by the Reserve Bank in exercise of powers conferred on it under sub-sections (2) and (3) of Section 25 A of the State Bank of India (Subsidiary Banks) Act, 1959 (as amended in 2007) is enclosed. 5. Please acknowledge receipt. Yours faithfully, (P. Vijaya Bhaskar) Chief General Manager DBOD. No. BC.No. 49 /29.39.001/2007-08 November 14, 2007 ‘Fit and proper’ criteria for elected directors on the boards of Associate Banks of State Bank of India In exercise of the powers conferred by sub-sections (2) and (3) of Section 25 A of the State Bank of India (Subsidiary Banks) Act, 1959 (as amended in 2007), the Reserve Bank of India hereby notifies that with immediate effect: (a) All the Associate Banks of State Bank of India are required to constitute a ‘nomination committee’ consisting of a minimum of three directors (all independent directors/non-executive directors) from amongst the board of directors. The Board of directors should also nominate one among them as Chairman of the nomination committee. The quorum required is three, including the Chairman. In case of absence of any member already nominated, the board of directors may nominate any other independent director in his place for the ensuing meeting. At the time of constituting the nomination committee the board can decide on its tenure. (b) The nomination committee should undertake a process of due diligence to determine the ‘fit and proper’ status of the existing elected directors/person to be elected as a director under Sec 25 (1)(d) of the Act ibid. For this purpose, the banks should obtain necessary information and declaration, in the format enclosed (Annexure-1), from the existing elected directors/persons, who file their nominations for election. The nomination committee should meet before the last date of acceptance of nominations in case of candidates to be elected and decide whether or not the person's candidature should be accepted based on the criteria mentioned below. The committee’s discussions should be properly recorded as formal minutes of the meeting and the voting if done should also be noted in case of both existing and proposed Directors. Based on the information provided in the signed declaration, Nomination Committee should decide on the acceptance or otherwise of the candidate and may make references, where considered necessary to the appropriate authority/persons/institutions etc., to ensure their compliance with the requirements indicated. (c) The nomination committee should determine the ‘fit and proper’ status of the existing elected Directors/proposed candidates based on the broad criteria as mentioned hereunder: (i) Educational qualification (ii) Experience and field of expertise (iii) Track record and integrity (The above list is only illustrative and not exhaustive). The Nomination Committee should see whether the non-adherence to any of the above criteria would hamper the existing elected director/proposed candidate from discharging the duties as a director on the Board of the bank. Further, the candidate coming to the adverse notice of any authority/regulatory agency or insolvency or default of any loan from any bank or financial institution would make the candidate unfit and improper to be a director on the Board of a bank. d) It is desirable that the board ensures, in the public interest, that the elected directors execute the deed of covenants (copy enclosed for ready reference –  Annexure-2 ) as recommended by the Dr Ganguly Group vide our circular DBOD.No.BC.116/ 08.139.001/2001-02 dated 20th June 2002 after the election and also every year as on 31st March. 2. The nomination committee is required to complete the process of determining the ‘fit and proper’ status of the existing elected directors on the Board of the bank at the earliest. 3. It is also mandatory that all the elected directors must furnish a simple declaration every year as on 31st March that the information already provided by them has not undergone any change and where there is any change, requisite details are furnished by the directors forthwith. If there are any significant changes, the nomination committee should undertake the due diligence exercise afresh and examine the ‘fit and proper’ status of the director. (Anand Sinha) Executive Director Annexure - 1 Name of Bank : ________________________ Declaration and Undertaking by Director* (with enclosures as appropriate as on              )

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-2008/184 · issued 14 Nov 2007. The plain-English explanation above is BankPulse’s own independent summary.

🖨 Print / Save as PDF 🔗 Copy link☆ Save for later