RBI Rules For Private Banks: Reserve Bank has issued new rules regarding MD and CEO of banks. According to the new rules, it is necessary to appoint two whole time directors in banks. RBI has issued these instructions to run the functioning of banks properly.
Reserve Bank of India: Reserve Bank of India (RBI) has issued new instructions regarding private banks. RBI has given information about this on Wednesday. Reserve Bank has issued new rules regarding MD and CEO of banks.
According to the new rules, it is necessary to appoint two whole time directors in banks. RBI has issued these instructions to run the functioning of banks properly. Apart from the festive season, many times chaos is seen in the work in banks. For this reason the Reserve Bank has taken this decision.
Private banks and wholly-owned subsidiaries of foreign banks have been asked to ensure the presence of at least two whole-time directors, including the Managing Director (MD) and the Chief Executive Officer (CEO), on their boards of directors.
RBI issued guidelines
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 in succession planning
It said that the establishment of such a team can help in the succession planning of the bank. This is all the more important in the backdrop of regulatory conditions relating to tenure and upper age limit for MD and CEO posts.
Must have 2 full time directors
The Reserve Bank asked banks to ensure that they have at least two whole-time directors, including the MD and CEO, on their boards to address issues and challenges. 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.
These banks have got 4 months time
According to the circular, in the context 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.
