Govt opens up State Bank of India managing director position to pvt sector

FSIB may hire HR agency to carry out behaviour and competency assessment of candidates

The government has for the first time opened up one managing director (MD) position at State Bank of India (SBI) to private-sector bankers, in a major overhaul of the way leadership is chosen in India’s public financial institutions.

 

It has also empowered the Financial Services Institutions Bureau (FSIB) to assess and recommend candidates, setting aside their Annual Performance Appraisal Reports (APARs). 

In a letter to public-sector banks (PSBs) and state-owned life and non-life insurers, the Department of Financial Services (DFS) under the Ministry of Finance has communicated that the Appointments Committee of the Cabinet has approved the revised consolidated guidelines for the appointment of whole-time directors (WTDs), including chairpersons, chief executive officers (CEOs), MDs, and executive directors (EDs), in such institutions. Business Standard has reviewed a copy of the letter. 

Under the revised guidelines, private-sector candidates applying for one of the four MD positions at SBI must have at least 21 years of professional experience, including a minimum of 15 years in banking. They must also have served either two years at the board level of a bank or at least three years at the highest level below the board. However, candidates eligible under public-sector positions shall also be eligible to apply under the position open for private candidates.

 

A vacancy for private bankers may come up as early as January 2026, when the tenure of the current SBI MD, Ashwini Kumar Tewari, is set to end. This also opens up the possibility of a private banker heading India’s largest public-sector bank in the future, as the SBI chairman is selected from among the four MDs.

 

To carry out behavioural and competency assessments, the FSIB has been allowed to hire an HR agency that would only make preliminary assessments and would not be involved in short listing of candidates.

 

The new norms also introduce strict eligibility conditions for public-sector banks, life, and non-life insurers. If an officer has been imposed two or more major penalties in his/her career, he/she shall not be eligible to apply for senior positions assessed by the FSIB. The penalties imposed, including minor penalties, on the applicants during the last 10 years period also need to be disclosed.

 

While APAR has been made irrelevant for assessment by FSIB for chairman, CEO, and MD positions, its scores will still carry weight up to 30 marks for ED-level selections. Additionally, ED of non-life insurers can now be transferred only with ACC approval, introducing formal oversight where transfers were earlier managed internally by the DFS.

 

A top official of a state-owned bank said the consolidated guidelines would speed up the process and top posts would be filled with competent people, enhancing overall banking performance. “Right now, so many top positions are vacant and that’s why we need a stringent process that can speed up the selection procedure,” said a top official of a public-sector bank.

 

Aditya Mishra, MD & CEO of CIEL HR Services, said opening up SBI MD position to the private sector would bring fresh talent and innovation to India’s largest bank. “There is so much happening in technology, and SBI as the largest Indian bank needs to be at a leadership position for innovation. But SBI doesn’t occupy that kind of positioning, neither in the global market nor in the Indian market. There is a need for new thinking, new ways of implementing and deploying technology — all that could be a challenge unless there are some external perspectives. Having an expert in the decision-making board will work well,” he added. 

 

Last month, the Ministry of Finance hosted two-day PSB Manthan to brainstorm with the top leadership of PSBs to unlock next-generation reforms. The government also plans to elevate at least two to three PSBs into the global top 20 by 2047.

 

Last month, the Ministry of Finance hosted a two-day PSB Manthan to brainstorm next-generation reforms with top PSB leadership. The government also plans to elevate at least two to three PSBs into the global top 20 by 2047.  For SBI MD, two year of residual service has been mandated as one of the eligibility criteria, treating 60 years retirement age. For MD&CEOs and EDs of other public sector banks, three years of residual tenure has been proposed. Minimum age for both has been fixed at 45 for SBI MD and MD&CEOs and 40 for EDs. SBI chairman retirement age is fixed at 63. 

Key changes

• DFS writes to PSBs and state-run insurers about revised guidelines approved by Appointments Committee of the Cabinet
• New norms pertain to appointments of whole-time directors, including chairpersons, CEOs, MDs, and EDs
• Strict eligibility conditions for PSBs and state-run insurers introduced
• FSIB authorised to hire HR agency to carry out behaviour and competency assessment of candidates