Way forward As a step towards distancing the regulator from the functioning of the Boards, the Reserve Bank has withdrawn its nominee directors from almost all the private sector banks. Observers have been appointed as a transitional measures mostly in respect of those banks which are yet to fully comply with the Reserve Bank’s guidelines of ownership of governance.
It is hoped that the need for observers also will diminish as the quality of governance improves. Second, legislative amendments have been proposed in regard to the public sector banks to remove the provisions for mandatory nomination of RBI officers on their boards and thus, to bring them on par with the private sector banks in this regard.