The Reserve Bank of India has made it mandatory for foreign and private banks to appoint at least 2 whole time directors. Banks which do not meet this parameter will complete it within 4 months.
The Reserve Bank of India (RBI) on Wednesday required private banks and wholly-owned subsidiaries of foreign banks to have at least two whole time directors, including a managing director (MD) and a chief executive officer (CEO), on their boards. Asked to ensure the presence of ). RBI said in a circular that in view of the increasing complexity of the banking sector, it becomes mandatory for banks to form an effective senior management team to deal with the current and emerging challenges.
Will help with succession planning
It said, “Establishment of such a team can help in succession planning of the bank. This is all the more important in the backdrop of regulatory stipulations relating to tenure and upper age limit for MD and CEO posts. The Reserve Bank asked banks to ensure that MDs and CEOs are included on their boards to address issues and challenges. There should be at least two whole-time directors including the CEO. However, the Board of Directors of the bank should decide on the number of whole-time directors keeping in mind the operational size, business complexity and other relevant aspects.
Reserve Bank issues rules for associate banks of private and foreign banks
- It is necessary to appoint minimum 2 whole time directors in the board.
- New rule of RBI for proper functioning of banks
- The board itself will decide how many directors there should be in the board.
- Those banks which do not meet this parameter should implement it within 4 months.
Follow the rules within 4 months
According to the circular, “In the context of these instructions, those banks which do not currently fulfill the minimum conditions are advised to submit proposals for the appointment of whole-time directors within four months.” There are no provisions related to the appointment of whole-time directors in the organization rules of the company, they can first seek early approval from the RBI.
