RBI fixes private bank MD, CEO tenures at 15 years;
compliance by Oct 1
The Reserve Bank of India (RBI) on Monday capped the tenure of managing directors
(MDs) and chief executive officers (CEOs) of private banks at 15 years. Promoters or
major shareholders, however, cannot hold these posts for more than 12 years, but the
RBI can choose to give them a three-year extension under extraordinary circumstances.
In its draft guidelines issued last year, the central bank had proposed a maximum of 10
years for promoter shareholders as MD and CEO.
According to the RBI’s latest guidelines on corporate governance in banks, after the
completion of their term, professional MDs & CEOs or whole-time directors will be
eligible for re-appointment in the same bank after a minimum gap of three years. During
the cooling-off period, they should not be associated with the bank or its group entities in
any capacity, either directly or indirectly.
The rules apply to private banks, small finance banks, and wholly owned subsidiaries of
The RBI will issue norms for other banks separately.
Banks have to comply with the instructions latest by October 1.
The upper age limit for MDs, CEOs and whole-time directors will be 70 years. The board
can fix a lower age limit if it chooses to, the RBI said.
The RBI will examine the level of progress and “adherence to the milestones for dilution
of promoters’ shareholding in the bank shall also be factored in by the Reserve Bank,"
the RBI notification said.
The chairman of a bank has to be an independent director, and at least half of the
directors attending the board meetings have to be independent directors.
The RBI will let the existing chairman, MD and CEO, or whole-time director's tenure to
be completed for which approvals have already been taken.
It would mean that Kotak Mahindra Bank’s Uday Kotak would complete his tenure as MD
and CEO even after being the head of the institution for 17 years. The RBI had approved