On June 11, 2020,India’s central bank, the Reserve Bank of India (RBI) in its Discussion Paper on ‘Governance in Commercial Banks in India’ proposed to set the upper age limit of Chief Executive Officers (CEOs) and whole time directors (WTDs) belonging to the promoter group of banks to 70 years and maximum tenure of 10 years. This offer has been made to improve administration in the banking sector.
Why is it important to limit tenure?
- The tenure has been limited in order to strengthen the culture of consistent governance and to adopt the principle of separating management from ownership.
- It further states that 10 years is sufficient time for the promoter / major shareholder of a bank to stabilize his work as a WTD or CEO of a bank and transform managerial leadership into a professional management. This will not only help in separating management from ownership, but will also promote the culture of professional management.
Who will be the WTD or CEO?
A management functionary who is not a promoter/major shareholder can be a WTD or CEO of a bank for 15 consecutive period & thereafter, the individual could be eligible for re-appointment as WTD or CEO only after the expiration of three years,or up to the expiry of the current WTDs/CEOs tenure, during which he/she not be appointed or associated with the bank in any capacity, either directly or indirectly, advisory or otherwise.
About Reserve Bank of India (RBI):
Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, one is yet to be appointed).