The maximum tenure for CEOs and MDs of public sector banks has been expanded to ten years, which would assist the government in retaining talent in the banking sector.
According to a government announcement issued in November, the appointment period has been increased from 5 years to 10 years, subject to a superannuation age of 60 years.
Previously, the MD or executive director of a public sector undertaking (PSU) bank could serve for a maximum of 5 years or 60 years, whichever came first. This also applies to all full-time directors of Central Public Sector Enterprises (CPSEs).
“A whole-time director, including the managing director, shall devote his whole time to the affairs of the nationalised bank and shall hold office for such initial term not exceeding five years and extendable up to a total period, including the initial term, not exceeding 10 years, as the central government may, after consultation with the Reserve Bank, specify and shall be eligible for re-appointment,” the notification said.
It noted that the amendment would be known as the Nationalised Banks (Management and Miscellaneous Provisions) Amendment Scheme, 2022.
The central government has the authority to terminate the term of office of a full-time director, including the managing director, at any time before the end of the stipulated term by providing him three months’ written notice or three months’ salary and allowances in lieu of notice.
The government’s decision would assist banks in retaining talent who advance to the level of full-time directors at a young age of 45-50 years.