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regular-article-logo Wednesday, 09 October 2024

Private sector banks boards to have at least two full-time directors: Reserve Bank

In a notification, the RBI said that given the growing complexity of the banking sector, it is imperative to establish an effective senior management team

Our Special Correspondent Mumbai Published 26.10.23, 11:13 AM
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The Reserve Bank of India (RBI) on Wednesday asked private sector banks and the wholly-owned subsidiaries of foreign banks to have at least two whole-time directors (WTDs), including the MD & CEO, on their boards.

According to the Companies Act, 2013, a whole-time director is in full-time employment with a company.

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In a notification, the RBI said that given the growing complexity of the banking sector, it is imperative to establish an effective senior management team.

"Establishment of such a team may also facilitate succession planning, especially in the background of the regulatory stipulations in respect of tenure and upper age limit for the MD and CEO positions," it added.

The banking regulator pointed out that to address these issues and challenges, banks are advised to ensure the presence of at least two WTDs, including the MD & CEO, on their boards.

The number of WTDs, it disclosed, shall be decided by the board of the bank by taking into account factors such as the size of operations, business complexity and other relevant aspects.

Banks that do not meet this minimum requirement have been asked to submit their proposals for the appointment of WTD within four months from today.

"Those banks which do not already have the enabling provisions regarding appointment of WTDs in their Articles of Association may first seek necessary approvals under Section 35B(1)(a) of the Banking Regulation Act ibid, expeditiously, to be in a position to comply with the requirements under these instructions," the RBI said.

"While ensuring compliance to the above instructions, careful consideration shall also be given to meet the requirements under other applicable statutory/regulatory provisions,’’ the RBI said.

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