'Not more than 15 years': RBI's new guidelines for tenure of bank MDs, CEOs

Reserve Bank of India on Monday issued instructions on governance for banks, including private sector banks, small finance banks (SFBs) and wholly owned subsidiaries of foreign banks.

Post of MD & CEO or WTD (whole time director) can't be held by same incumbent for more than 15 years, said the banking regulator. 

The post of the MD & CEO or WTD cannot be held by the same incumbent for more than 15 years. Thereafter, the individual will be eligible for re-appointment as MD & CEO or WTD in the same bank, if considered necessary and desirable by the board, after a minimum gap of three years, subject to meeting other conditions. During this three-year cooling period, the individual shall not be appointed or associated with the bank or its group entities in any capacity, either directly or indirectly," said RBI in its latest circular. 

The circular will not be applicable to foreign banks operating as branches in India. RBI also said that upper age limit for MD & CEO and WTDs in private banks would continue to be 70 years.

"It is clarified that the extant instructions on upper age limit for MD & CEO and WTDs in the private sector banks would continue and no person can continue as MD&CEO or WTD beyond the age of 70 years. Within the overall limit of 70 years, as part of their internal policy, individual bank's Boards are free to prescribe a lower retirement age for the WTDs, including the MD&CEO. MD & CEO or WTD who is also a promoter/ major shareholder, cannot hold these posts for more than 12 years. However, in extraordinary circumstances, at the sole discretion of the Reserve Bank such MD&CEO or WTDs may be allowed to continue up to 15 years," central bank further said. 

Banks have time till October 1, 2021 to implement the latest policy. 

"While the instructions shall come into effect from the date of issue of this circular, in order to enable smooth transition to the revised requirements, banks are permitted to comply with these instructions latest by October 01, 2021," said RBI. 

"Banks with MD & CEOs or WTDs who have already completed 12/15 years as MD & CEO or WTD, on the date these instructions coming to effect, shall be allowed to complete their current term as already approved by the Reserve Bank,"said the banking regulator.