RBI asks banks to ensure at least two Whole Time Directors on their Boards

The Reserve Bank of India (RBI) has asked banks to ensure the presence of at least two Whole Time Directors, including the MD & CEO, on their Boards. “Given the growing complexity of the banking sector, it becomes imperative to establish an effective senior management team in the banks to navigate ongoing and emerging challenges. Establishment of such a team may also facilitate succession planning, especially in the background of the regulatory stipulations with respect to tenure and upper age limit for Managing Director and Chief Executive Officer (MD&CEO) positions,” RBI said on Thursday.

The number of WTDs shall be decided by the Board of the bank by taking into account factors such as the size of operations, business complexity, and other relevant aspects.

Most of the banks already have whole time directors but those banks that currently do not meet the minimum requirement have to submit their proposals for the appointment of WTD(s) under Section 35B(1)(b) of the Banking Regulation Act, 1949, within a period of four months. “Those banks which do not already have the enabling provisions regarding appointment of WTDs in their Articles of Association may first seek necessary approvals under Section 35B(1)(a) of -2- the Act ibid, expeditiously, so as to be in a position to comply with the requirements under these instructions. While ensuring compliance to the above instructions, careful consideration shall also be given to meet the requirements under other applicable statutory/regulatory provisions,” RBI said.