RBI Mandates Private Sector and Foreign-Owned Banks to Appoint Minimum Two Whole-Time Directors, Including MD & CEO, for Effective Governance

Summary

Document: RBI/2023-24/70, DOR.HGG.GOV.REC.46/29.67.001/2023-24

Date: October 25, 2023

Recipient: All Private Sector Banks and Wholly-Owned Subsidiaries of Foreign Banks (excluding Payment Banks and Local Area Banks)

Summary:

The Reserve Bank of India (RBI) has issued a circular (RBI/2023-24/70) dated October 25, 2023, to all private sector banks and wholly-owned subsidiaries of foreign banks, excluding payment banks and local area banks. The circular concerns the appointment of Whole-Time Directors (WTDs) in banks.

The circular emphasizes the importance of having an effective senior management team in banks to navigate the growing complexity and emerging challenges in the banking sector. To achieve this, banks are advised to ensure the presence of at least two Whole-Time Directors, including the Managing Director and Chief Executive Officer (MD&CEO), on their Boards.

The number of WTDs will be decided by the Board of the bank, taking into account factors such as the size of operations, business complexity, and other relevant aspects. Banks that do not currently meet the minimum requirement are advised 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 from the date of issuance of the circular.

The circular also highlights the need for banks to consider other statutory and regulatory provisions while ensuring compliance with the instructions.

Key Points:

Appointment of at least two Whole-Time Directors, including the MD&CEO, on the Board of banks.
Finalization of the number of WTDs by the Board of the bank, considering factors such as size of operations, business complexity, and other relevant aspects.
Submission of proposals for the appointment of WTD(s) by banks that do not currently meet the minimum requirement.
Compliance with other statutory and regulatory provisions.

Purpose:

The purpose of the circular is to ensure that banks have an effective senior management team in place to navigate the growing complexity and emerging challenges in the banking sector.