It’s ironic that Pepsi, despite a backlash in India over allegedly high pesticide contents in beverages sold in the country and a manufacturing ban in one state, appoints an Indian to head the company when the entire controversy is based on the report of a non-government agency. And it’s shocking that Kidwai has been handpicked for the treatment by the country’s central bank when there are innumerable instances of bank chiefs sitting on the board of various corporates in India and abroad. Deepak Parekh, chairman of HDFC, sits on the boards of 14 companies, including Singapore’s largest telecom company SingTel which has a significant stake in India’s largest private sector telecom major Bharti Enterprises. Tata-owned Indian Hotels, Hindustan Lever, Mahindra & Mahindra, ICI India, Castrol India, Mico and Burroughs Welcome are some of the other companies where Parekh sits, either as a director or chairman. Similarly, ICICI chairman N. Vaghul is a director on the board of Mittal Steel, Wipro, Apollo Hospitals, Mahindra & Mahindra, Nicholas Piramal and Samtel Colour.

Under these circumstances RBI’s logic behind preventing Kidwai from sitting on the board of Nestle smells of babudom dominating rationality in the country’s banking regulation. Who took the call on this is difficult to fathom. And if RBI has such an exacting stance on conflict of interest, how would it explain the presence of corporate chiefs who have been sitting on its own central board of directors for ages? Wipro chairman Azim Premji, Aditya Birla group chairman Kumar Mangalam Birla, former HLL chairman Ashok Ganguly, Suresh Kumar Neotia, chairman, Gujarat Ambuja Cement, and Lakshmi Machine Works chairman D. Jayawardanavelu sit on the current board of RBI. Two other corporate bigwigs who retired this year from the board were Tata group chairman Ratan Tata and Infosys Technologies chairman N.R. Narayana Murthy.

How would the RBI explain the conflict of interest on its own central board? HSBC-Nestle seems like a peripheral case of conflict of interest if you try to gauge the magnitude of influence a corporate CEO could have on RBI’s board, deciding the nation’s banking policies. The nation’s central bank needs to get out of its myopic stance and take a more mature view of issues dealing with transborder appointments. Bank CEOs sitting on boards of companies is a global practice. More than that, corporate America, for instance, shares an incestuous relationship with political America. CEOs and politicians change hats so often that at times it is difficult to understand who they represent. CEOs and directors change over to politics and vice versa the world over — in the US, Japan, Korea, Britain, Germany, Italy and France.

The trick is in devising regulations that enforce strict penalties for wrongdoing. The prevention-is-better-than-cure strategy may not be the best fit for issues like these. As Indian business gains in prominence, increasingly Indians will be invited to sit on the boards of global corporations. In such a globalised environment, RBI must ensure it does not come in the way of the aspirations of Indians to leverage their expertise in integrating with international business. Meanwhile let’s give Nooyi three hearty cheers.

The writer is deputy editor, The Financial Express