HDFC Bank Limited

Q. How effective can the board be in a large bank like yours?

A. A board can be as effective as the functions of the board and the management. The board, as far as I can see, is the supervisory body ensuring that the values of the bank as well as the objectives and principles and policies are followed. However, they can only be effective if they are backed up by the management through appropriate reporting and an open style of management. So I think a board, given the wide variety of experience that they have, could be very valuable in managing risk or defining the macro environment in terms of making sure that the policies and procedures reflect the kind of risk that the institution should take as presented in the business plan. But it would have to be a joint effort between the board and the management.

Q. How can the level of corporate governance be raised?

A.Firstly, it must be clearly understood that the board has a role. Board member is the representative of the shareholders, he/she is required to ensure that there is a balance and the management is doing what it's supposed to do. I think wherever you will find a good board, the job and responsibility of the board is very clearly defined. The law provides for the board to be empowered under regulation and if they exert the power given to them within the existing framework, there is no reason why you should not have an effective board.

Q. How do you constitute a framework of best practice structures and processes?

A. The point is that all of us know what is right and what is wrong. The question is how to institutionalize it. It's only when practices are institutionalized to the last detail that they work. So the framework has to be policy and procedures that back your fundamental objectives.

Q. How do you assess the role of the Ministry of Corporate Affairs and the Securities and Exchange Board of India? Is there any scope for further improvement in corporate governance issues? How effective are the ministry and regulators?

A. This is a tough one. In general, I would only say it is better to keep simple rules, fewer rules and if somebody violates it, he should be penalized. The problem is not with the rules in this country, the problem is with the accountability. If there is a rule and you break it, you should be worried. So I think there is no dearth of good regulators who have provided the framework, but the problem is ensuring that there is accountability and deterrent punishment.

Aditya Puri

Managing Director

HDFC Bank's board is very well-constituted with an apt mix of dominant professionals and experts from different spheres of life. The independent members of the board are a significant source of support to the management team. They bring in a strong focus on outcomes and actions while providing adequate diversity required for banking operations.

The board and the management team work in tandem to formulate the strategy and together ensure an efficient execution, compliance and a strong culture of governance.

The board has delivered value to its shareholders and presided over a period of rapid growth for the bank while effectively managing business risks.