Banking Sector Reforms

RBI issues guidelines for tenure of bank CEOs, MDs

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Bank governance

What the guidelines say

  • The Reserve Bank of India recently issued certain instructions on the governance for banks.
  • As per the instructions from the central bank, the post of Managing Director (MD) and Chief Economic Officer (CEO) MD or Whole Time Director (WTD) cannot be held by the same incumbent for more than 15 years.
  • The individual will be eligible for re-appointment as MD&CEO or WTD in the same bank after a minimum gap of three years, subject to meeting other conditions.
  • The upper age limit for MD & CEO and WTDs in private banks would continue to be 70 years.
  • MD&CEO or WTD who is also a promoter/ major shareholder, cannot hold these posts for more than 12 years except in extraordinary circumstances.
  • Banks are permitted to comply with these instructions latest by October 01, 2021.

Applicability

  • These guidelines are applicable for banks, including private banks, Small Finance Banks (SFBs), Wholly Owned Subsidiaries of Foreign Banks.
  • However, it added that this circular is not applicable to foreign banks operating as branches in India.
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