The Reserve Bank of India on Wednesday asked private banks and wholly-owned subsidiaries of foreign banks to ensure at least two Whole Time Directors (WTDs), including the MD & CEO, on their boards to facilitate succession planning.
Given the growing complexity of the banking sector, it becomes imperative to establish an effective senior management team to navigate the ongoing and emerging challenges, the RBI said in a circular.
“Establishment of such a team may also facilitate succession planning, especially in the background of the regulatory stipulations in respect of tenure and upper age limit for Managing Director and Chief Executive Officer (MD & CEO) positions,” it said. The RBI asked banks to ensure the presence of at least two WTDs, including the MD & CEO, on their boards, to address issues and challenges.
The number of WTDs should 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.
“In compliance to these instructions, banks that currently do not meet the minimum requirement…are advised to submit their proposals for the appointment of WTD(s)… within a period of four months,” the circular said.
It 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.