There is increased complexity in the banking sector and a need for competent senior management teams. Hence, the RBI has sought at least two Whole Time Directors (WTDs) on private and international banks’ boards to support succession planning…
To assist succession planning, the Reserve Bank of India (RBI) has advised private banks and wholly-owned subsidiaries of foreign banks to have at least two Whole Time Directors (WTDs), including the MD & CEO, on their boards.
The RBI stated in a circular that an competent senior management team is needed to address present and future banking sector issues due to its increased complexity.
“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,” noted.
To address concerns and challenges, the RBI advised banks to include at least two WTDs on their boards, including the MD and CEO. The bank board should consider operations size, business complexity, and other considerations while determining WTDs.
“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 memo added.
It added that banks without WTD requirements in their Articles of Association may quickly seek RBI permission.
Conclusion
The RBI has advised private banks and foreign banks’ wholly-owned subsidiaries to have at least two Whole Time Directors (WTDs), including the MD & CEO, on their boards to support succession planning. The RBI stressed the need for a strong senior management team to handle the banking sector’s expanding complexity. The bank’s board should consider operations size and business complexity when determining WTDs. Banks that do not reach the minimum should propose WTD appointments within four months. Banks without WTD provisions in their Articles of Association might request RBI permission.
