The approach paper will be prepared by the Indian Banks' Association (IBA). IBA sources confirmed that the bankers' body would start working on the paper once it gets the nod at the management committee's meeting in Delhi this month.

Kelkar has directed banks to prepare the paper after a number of chairmen voiced their unhappiness over the composition of boards and the difficulties being faced by them, particularly with government directors.

"Directors on some bank boards are making life difficult as a result of which bank chiefs and management committees are unable to take decisions," a senior banker said.

Sources said that the chairman of a Bangalore-based bank complained to the finance secretary that his board does not allow him to functionindependently and the government nominee was creating hassles for him. Incidentally, Bank of India chairman-cum-managing director MG Bhide had recently resigned as he was unable to carry out his functions in the face of stiff resistance put up by the government director.

According to sources, State Bank of India chairman MS Verma has told Kelkar that bank's local boards need to be revamped urgently. Verma reportedly said that the board members were there for the last 12-15 years, while senior bank executives kept moving after every two-three years. The State Bank wants this anomaly removed so that bureaucratisation is removed at the local level.

IBA is expected to lay down norms for selecting directors in its approach paper. "For example, while selecting a director to represent the agricultural sector, the bank need not select an agriculturalist. He can be an economist who specialises in agriculture. Similarly, the government nominee should not interfere unnecessarily as this may lead to delays. Ways haveto formulated so that chairmen are allowed a certain degree of freedom to take major decisions," sources said.

With the industrial slowdown and banks' non-performing assets on the rise, the directors are afraid to take decisions as they feel they will be pulled up by investigative agencies, sources pointed out.

The approach paper is likely to recommend reduction in the term of directors from five years to two years. "The directors should be appointed for a shorter term. The entire board should be revamped after every two to three years," said an IBA source.