Govt revises policy to ensure accountability in state bank appointments

Business Report :

The government has revised its policy on the appointment and performance evaluation of chairmen and directors of state-owned banks and financial institutions, aiming to boost accountability, transparency, and profitability in the sector.

According to a directive issued by the Financial Institutions Division (FID) on Thursday, this marks the first time that performance evaluation criteria have been formally incorporated into the appointment and reappointment process for bank board members.

Under the new policy, chairmen and directors will face annual performance reviews, and reappointments will depend on their previous performance results. The policy also calls for regular training and capacity-building programs to enhance leadership and governance standards.

A key feature of the revised guidelines is the clear definition of board-level responsibilities, including policy formulation, risk management, internal audit, and compliance oversight. However, the policy emphasizes that board members must not interfere in day-to-day administrative activities, ensuring that management functions remain independent.

The directive also sets stricter eligibility criteria for board appointments. Individuals with loan or tax defaults, or lacking at least 10 years of professional or administrative experience, will be disqualified. Those with records of criminal offences, financial misconduct, or fraud will also be barred. Furthermore, no person will be allowed to serve on multiple bank boards simultaneously.

The revised policy prioritizes professionals with expertise in fields such as economics, banking, finance, law, commerce, agriculture, industry, or information technology. The government will retain the authority to select candidates with proven competence and integrity.

In a notable step toward inclusivity, the policy reaffirms the requirement that one-third of board members be women, a condition that has often been overlooked in previous appointments.

Each chairman or director will serve a three-year term, with a maximum of two consecutive terms, and may be reappointed after a three-year gap. The age limit for board members has been set between 45 and 75 years.

The reforms come amid growing criticism of political influence and irregularities in bank board appointments during past administrations. Many appointees including academics, cultural figures, and political activists were often chosen despite lacking relevant financial expertise.

By enforcing stricter qualifications and clearer accountability measures, the government hopes to restore credibility, strengthen governance, and improve financial performance across the state-owned banking sector.