RBI proposes 10 year tenure for bank promoter-CEOs, 15 years for non-promoters

The Reserve Bank of India (RBI) has proposed new term for a chief executive officer (CEO) or whole-time director (WTD) of a bank. As per the new proposed norm a CEO or a whole time director are allowed to work till she or he turned 70, and any promoter or major shareholder should not continue as CEO beyond 10 years.

Besides, if the CEO or WTD is not a promoter or major shareholder, the candidate can work in office for 15 years.

RBIIn addition, the person gets a chance for re-appointment only for three more 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.

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The central bank also stated if any such rule comes into effect on the basis of the paper, the CEO or WTD who has completed such 10 or 15 years in the lender would get two years or till the expiry of the tenure, whichever of the two affords the person a longer timeframe, to look for a successor. This then revokes the case of some private bank CEOs who are trying to get a reappointment after they have turned 70, and puts the onus on them to put through a succession plan.

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The discussion paper has put together the best practices of corporate governance in banks, and wanted to set-up a clearly defined separation between the board and the management. The banking regulator said board meetings should secure 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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