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RBI proposes 10-yr term for bank promoter-CEOs, 15 yrs for non-promoters

If the CEO or WTD is not a promoter or major shareholder of the bank, that person can continue for 15 years at the bank, after which he or she must step down.

June 12, 2020 13:11 IST

A chief executive officer (CEO) or whole-time director (WTD) of a bank could work till she or he turned 70, and any promoter or major shareholder should not continue as CEO for more than 10 years, the Reserve Bank of India (RBI) reiterated on Thursday.

But if the CEO or WTD is not a promoter or major shareholder, the person can stay in office for 15 years.

The person stands a chance for re-appointment only after three years, the period in which there should be no association with the bank in any capacity.

“This will not only help in achieving the separation of ownership from management but also reinforce a culture of professional management,” the discussion paper said.

The central bank said if any such rule was made on the basis of the paper, the CEO or WTD who has completed such 10 or 15 years in the bank would have two years or till the expiry of the tenure, whichever of the two affords the person a longer timeframe, to identify and appoint a successor. This then closes the case of some private bank CEOs trying to get a reappointment after they have turned 70, and puts the onus on them to put through a succession plan.

ALSO READ: SC asks Airtel, Vodafone Idea for road map on payment of AGR dues

The discussion paper put together the best practices of corporate governance in banks, and wanted to create a clearly definable separation between the board and the management. The central bank said board meetings should record the minutes, even the views of dissenting members.

“It must be ensured that the minutes of the meeting of the board as well as its committees are so recorded that it shall be possible to appreciate the quality of deliberations including individual directors view on the matter, independence of directors, critical decisions made, dissenting views expressed and discussed within the decision-making process,” the paper said.

 

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RBI proposes 10-yr term for bank promoter-CEOs, 15 yrs for non-promoters

If the CEO or WTD is not a promoter or major shareholder of the bank, that person can continue for 15 years at the bank, after which he or she must step down.

A chief executive officer (CEO) or whole-time director (WTD) of a bank could work till she or he turned 70, and any promoter or major shareholder should not continue as CEO for more than 10 years, the Reserve Bank of India (RBI) reiterated on Thursday.

But if the CEO or WTD is not a promoter or major shareholder, the person can stay in office for 15 years.

The person stands a chance for re-appointment only after three years, the period in which there should be no association with the bank in any capacity.

“This will not only help in achieving the separation of ownership from management but also reinforce a culture of professional management,” the discussion paper said.

The central bank said if any such rule was made on the basis of the paper, the CEO or WTD who has completed such 10 or 15 years in the bank would have two years or till the expiry of the tenure, whichever of the two affords the person a longer timeframe, to identify and appoint a successor. This then closes the case of some private bank CEOs trying to get a reappointment after they have turned 70, and puts the onus on them to put through a succession plan.

ALSO READ: SC asks Airtel, Vodafone Idea for road map on payment of AGR dues

The discussion paper put together the best practices of corporate governance in banks, and wanted to create a clearly definable separation between the board and the management. The central bank said board meetings should record the minutes, even the views of dissenting members.

“It must be ensured that the minutes of the meeting of the board as well as its committees are so recorded that it shall be possible to appreciate the quality of deliberations including individual directors view on the matter, independence of directors, critical decisions made, dissenting views expressed and discussed within the decision-making process,” the paper said.

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