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Manipal Housing Finance Syndicate Limited

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Corporate Governance - Internal Guidelines & Policy

Corporate Governance refers to the whole set of rules, processes, norms, mechanisms, policies and regulations which is in place and which aim at achieving desired corporate behavior and corporate conduct. The Board is pivotal in the corporate governance process. MHFSL is ever keen to demonstrate good corporate citizenship through normative approach ethical behavior and sound corporate governance practices. Corporate governance essentially involves balancing of interests of different stake holders namely, shareholders, promoters, customers, lenders, employees, regulators government and society at large. As corporate governance seeks to serve as a framework for attaining corporate objectives it encompasses practically every sphere and every aspect of management from corporate planning and internal controls to performance measurement and review and corporate disclosures.

MHFSL firmly believes in building up long term relationships with its stake holders namely share holders, depositors, borrowers, promoters and other business associates. Cultivating long term and sustainable relationships with its stake holders has been an area of focus for MHFSL. MHFSL has always complied with applicable laws, regulations, legal provisions and directions of regulators.

Objectives: The Corporate Governance Policy has the following objectives:-

  1. To ensure effective governance over the company’s affairs for the benefit of stake holders.
  2. To create value and long term wealth for the stake holders.
  3. To ensure fulfillment of responsibilities in relation to stake holders, government, employees and society at large.
  4. To ensure balancing of interests of stake holders.
  5. To ensure that board meetings and meetings of various committees constituted by the Board contribute to effective governance.
  6. To ensure proper and right corporate conduct by adopting relevant and suitable policies and through compliance with applicable laws, rules and regulations.
  7. To ensure evaluation of overall effectiveness and performance of the Board and that of Directors.
  8. Adopting and implementing best practices of corporate governance in full conformity with the latter and the spirit of the laws of the land, rules, directions and guidelines of regulators and on the basis of study of corporate governance practices in other HFCs.

Board: The Board is pivotal to the governance process. The Board shall conduct 4 meetings per year i.e. atleast one meeting per quarter. Special meetings will be convened as and when necessary. Long term strategic and business plans will be reviewed periodically during the meetings. The chairman will preside over the meetings, supervise deliberations and ensure proper conduct of proceedings.

  1. Attendance: Directors are expected to attend board meetings and the meetings of the committees in which they are members regularly.
  2. Selection of Agenda Items for the Board Meetings will be done in consultation with the Chairman and Executive Director and suggestions made by other Directors for inclusion of any of the items on the Agenda will also be considered.
  3. Agenda papers and notes in respect of various agenda items will be prepared and sent to the Directors in advance to enable them to study the same and come prepared for the Board Meetings.
  4. The Board comprises six Directors. Out of them, two Directors will be the Nominees appointed by the Promoter Bank namely Syndicate Bank.
  5. The decision taken and resolutions passed on the basis of the deliberations and discussions in the meetings will be included in the minutes/proceedings of the meeting and the same will be presented before the Board in the next meeting for approval with or without modification.
  6. Selection of Directors: The Nomination Committee is responsible for identifying and screening candidates for being appointed as Directors. The Board is responsible for nominating members to the Board and also for filling-up vacancies on the Board as and when they occur. In the case of Nominee Directors, however, the appointment will be made by the Board on the basis of the nomination communicated by the promoter Bank.
  7. Board Membership Criteria: The Board Membership Criteria cover the following:-
  1. Personal characteristics namely highest personal and professional ethics, integrity and values, inquiring and independent mind and practical wisdom and mature judgement.
  2. Experience in policy making level in business, government service or education.
  3. Expertise that will be useful to the company and be complementary to the background and experience of other Board members. Previous experience as a Director in other companies will be an added advantage.
  4. Commitment to serve on the Board over the period of several years depending upon period of appointment/re-appointment.
  5. No involvement in activities or interest that creates conflict with the Directors’ responsibility in MHFSL.
  6. The nomination committee is responsible for assessing the proper mix of skills, talents and qualities required for Board members in the context of perceived needs of the Board at a given point of time and the Board shall periodically review and up-date criteria as deemed necessary.
  7. vii) Conflict of interest: Each Director has a statutory duty and implied duty of loyalty to the company. If a Director has a personal or business interest in a proposed transaction, agreement or other matter, before the Board involving the company, the Director shall disclose the interest to the Board and excuse himself from participation in the related deliberations and shall abstain from voting on the matter.
  8. On an annual basis, each Director shall present to the Board a declaration of interests setting forth such director’s business affiliations with third parties. Each declaration of interest shall include any relationship between the Director and any entities with which any other directors are affiliated as a potential or actual conflict of interest could arise in such situations. Each Director shall present to the Board an up-dated declaration of interest promptly after entering into new affiliation or changing a pre-existing affiliation.
  9. A declaration and undertaking should be submitted by every Director giving the additional information in the prescribed format as indicated in the Notification issued by NHB. In addition, a deed of covenant in the prescribed format should also be furnished by each Director as on 31st March every year.
  10. Committees of the Board:
  1. Names of Committees: The Committees appointed by the Board presently include, Audit Committee, Nomination Committee, CSR Committee, Risk Management Committee, ALM Committee, Customer Service Committee, etc. The Board is also free to appoint any additional committee with suitable members thereon at any time depending upon the need. The membership of different committees will be as decided in the Board Meeting. Rotation of membership from time to time can also be considered and done by the Board. Each committee shall meet as frequently and for such length of time, as may be required to carry out any of its assigned duties and responsibilities. Members of different committees are encouraged to attend regularly the committee meetings and participate in the deliberations. Different committees will report to the Board regarding deliberations wherever required.

Role & Responsibilities of different Committees:-

S No.

Name of the Committee

Role & Responsibilities

1

Audit Committee

1.Over sight on company’s financial reporting process and aspects relating to disclosure of its financial information to ensure that the financial statement is correct, adequate and credible.

2. Terms of appointment of statutory Auditors

3. Consideration and recommendation of fees payable to statutory auditors to the Board. Review of annual financial statements such as Profit & Loss Account and Balance Sheet and recommendation of the same to the Board for adoption.

4. Review of the statements and reports financial or otherwise to be placed before the Board from time to time.

5. Review of funds’ position from time to time.

6. Sources and uses of funds, etc.

7. Evaluation of internal financial controls and risk management systems.

8. Review of performance of internal auditors and review of adequacy of internal audit function.

9. Review of observations of internal audit and inspection.

10. Review of matured deposits and examination of reasons for non-renewal.

11. Review of the functioning of the Whistle Blower Mechanism

12. Any other functions assigned by the Board, from time to time.

2

Nomination Committee

1. Formulation of criteria for determining qualification, qualities and positive attributes of Directors and independence of a Director and making recommendation to the Board regarding policy aspects relating to remuneration of Directors, key managerial personnel, etc.

2. Formulation of criteria for evaluation of performance of independent Directors.

3.   Formulation of policy on diversity of Board of Directors.

4. Identification of persons with suitable qualifications and qualities and talents who can be considered for appointment on the Board as Directors and recommending to the Board.

5. Formulation of policy regarding the remuneration to key managerial personnel and other senior level executives.

6. Review of Note on management discussion forming part of annual report.

3

Corporate Social Responsibility Committee

1. The CSR Committee is charged with the responsibility of implementation of CSR policy. This committee will from time to time, decide upon the amounts to be ear-marked for spending by way of fulfillment of corporate social responsibility of the company and making suitable recommendation to the Board for sanction. This committee is also responsible for identifying suitable CSR activities for funding , including Prime Minister’s Relief Fund, Chief Minister’s Relief Fund or other activities for which funding can be considered.

S No.

Name of the Committee

Role & Responsibilities

4

Risk Management Committee

1. Formulation of risk management policy, its review and revision from time to time.

2. Review of current status on outer limits in the risk management policy and reporting to the Board.

3. Review of the matters relating to risk management and;

4. Review and monitoring of the different types of risks to which the company is exposed during the course of its operations and functioning.

5

ALM Committee

1. The ALM Committee is charged with the responsibility of ensuring proper asset liability management.

2. The committee will study the gaps and mismatch found as between maturities of assets and liabilities in different time buckets and also suggest the ways of meeting such gaps/remedying the situation.

3.The committee will also look into interest rates on loans and advances from time to time and recommend changes to be made.

4. This committee will also examine the ALM statements/reports to be submitted to the NHB every half year and ensure that the statement is correct in all respects.

6

Share Transfer Committee

Function of this committee is decision on transfer and transmission of shares from time to time on the basis of the applications received from the shareholders with relevant documents.

7

Loan Sanction Committee

1. The loan sanction committee meets periodically and sanctions housing loans and other loans beyond the limit of Rs.1 Crore.

2. It also reviews the sanctions made by the Executive Director and other authorities of the loans for amounts lessen than Rs.1 Crore and takes decision regarding the statement of sanctions to be periodically placed before the Board indicating therein the sanctions of loans of above Rs.1 Crore made by the committee.    

3. It also reviews the observations made by the Board if any and considers and decides upon suitable corrective action.

Evaluation of Board performance: The Nomination Committee shall develop a process where by the Board of Directors will annually review the effectiveness as well as performance of the Board and that of the Committees and provide input for improvement required.

Corporate Governance is an evolving process. Accordingly, the governance guidelines will be reviewed periodically by the nomination committee initially and by the Board finally for formulation of final process and guidelines.

The internal guidelines on corporate governance and the policy will be displayed on the website of the company.

The importance of corporate governance can hardly be over emphasised. Companies are usually differentiated, based on corporate governance practices, business ethics, long term track record and effectiveness in engaging with various stake holders. MHFSL will continue to focus on the matter in order to further strengthen corporate governance practices from time to time.