Two whole-time directors must: RBI

In a move to strengthen the senior management team and better succession planning of private sector banks and wholly-owned subsidiaries of foreign banks, the Reserve Bank of India (RBI) on Wednesday asked them to ensure the presence of at least two whole-time directors (WTDs), including the MD & CEO, on their boards.

Banks that do not meet the minimum requirement have to submit their proposals for the appointment of WTDs within four months.

“The establishment of such a team may also facilitate succession planning, especially in the context of the regulatory stipulations regarding tenure and upper age limits for Managing Director and Chief Executive Officer (MD & CEO) positions,” it said.

Experts say that the decision-making of these committees will improve due to the presence of whole-time directors.

“For critical decision-making and delegation of powers, it is important that the banks have at least two executive whole-time directors. This step will strengthen the decision-making process of banks,” Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services, told FE.

Bankers said the move will bring more clarity for smaller and mid-size banks regarding appointment of whole-time directors.

“I think it is a good step because earlier there were some issues in terms of appointing higher ED level officials at small and mid-sized lenders, especially the private ones,” a senior official of a private bank.

The central bank further said banks, which do not already have the enabling provisions regarding appointment of WTDs in their Articles of Association, may first seek necessary approvals from the RBI, expeditiously.