RBI Decision For Banks: The Reserve Bank has asked banks to have at least two whole-time directors, including the MD and CEO, on their boards of directors to address issues and challenges.
RBI Decision: The country’s central bank Reserve Bank of India has taken a big decision. In a major decision for the banking sector, RBI has said that private banks and wholly-owned subsidiaries of foreign banks must have at least two whole-time directors, including a Managing Director (MD) and a Chief Executive Officer (CEO), on their boards of directors. That is, it has been asked to ensure the presence of whole-time directors.
RBI has issued circular
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 existing and emerging challenges. “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 limits for MD and CEO posts,” it said.
What did the Reserve Bank say to the banks?
The Reserve Bank asked banks to ensure that their boards of directors have at least two whole-time directors, including the MD and CEO, to address issues and challenges. However, the Board of Directors of the bank should decide the number of whole-time directors keeping in mind the operational size, business complexity and other relevant aspects.
According to the RBI circular, “In terms of these instructions, banks which currently do not fulfill the minimum conditions are advised to submit proposals for appointment of whole-time directors within four months.” It said that banks whose organization rules do not have provisions related to the appointment of whole-time directors can first seek early approval from the RBI.
