What changed
RBI issued a circular on May 23, 2011, partially modifying the format of the 'Declaration and Undertaking' used for assessing directors' fit and proper status. An explanatory note has been added against Column IV(g) of the format. Banks are now required to use this revised format for both existing directors and those to be appointed or elected.
What it means for you
This change tightens the due diligence process for bank directors by clarifying the disclosure requirements under Column IV(g), which relates to adverse regulatory notices. Banks must update their internal forms and processes to incorporate the revised declaration. Non-compliance could lead to regulatory scrutiny, so lenders should ensure timely adoption.
What you must do
- Replace the old 'Declaration and Undertaking' format with the revised version from Annexure 1 of this circular.
- Obtain the revised declaration from all existing directors and from any person being appointed or elected as director.
- Ensure the explanatory note for Column IV(g) is clearly communicated to directors and candidates.
- Update internal due diligence checklists and training materials to reflect the new format.
Who it affects
All nationalised banks, All private sector banks, All associate banks of State Bank of India, Board of directors and nomination committees, Compliance and legal departments of banks
What is the key change in the revised declaration format?
The key change is the addition of an explanatory note against Column IV(g), which deals with whether a director has come to the adverse notice of a regulator like SEBI, IRDA, or others. This clarifies the disclosure requirement.
Does this circular apply to existing directors or only new appointments?
It applies to both. Banks must obtain the revised declaration from existing directors as well as from persons to be appointed or elected as directors.
What happens if a bank does not use the revised format?
The circular mandates use of the revised format. Non-compliance could be viewed as a regulatory lapse, potentially leading to supervisory action or penalties.