Banking

RBI issues advisory to banks to ensure the presence of two Whole Time Directors

25.10.2023

RBI advises banks to ensure the presence of at least two Whole Time Directors (WTDs), including the MD and CEO, on their Boards. The number of WTDs shall be decided by the Board of the bank by considering factors such as the size of operations, business complexity, and other relevant aspects. The decision is in wake of growing complexity of the banking sector. It becomes imperative to establish an effective senior management team in the banks to navigate ongoing and emerging challenges.

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 Managing Director and Chief Executive Officer (MD&CEO) positions. The directive applies to both private banks and wholly-owned subsidiaries of foreign banks.

In compliance to the instructions, banks that currently do not meet the minimum requirement are advised to submit their proposals for the appointment of WTD(s) under Section 35B(1)(b) of the Banking Regulation Act, 1949, within a period of four months from the date of issuance of this circular. 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 Act, expeditiously, so as to be in a position to comply with the requirements. While ensuring compliance to the instructions, careful consideration shall also be given to meet the requirements under other applicable statutory/regulatory provisions.

Tags : Appointment Time Director Board

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