Banks await RBI approval for appointing second whole-time director

Few need time as no regulatory approval yet for new CEO

More than half a dozen private-sector banks are awaiting regulatory approval for the appointment of a second whole-time director on their boards.  

In a notification in October 2023, the RBI advised banks to ensure the presence of at least two whole-time directors, including the managing director (MD) and chief executive officer (CEO), on their boards. Banks were asked to send proposals for the second whole-time directors within four months.

A host of banks, such as IDFC First Bank, City Union Bank, CSB Bank, South Indian Bank, and Karur Vysya Bank, have sent their proposals to the RBI for the appointment of a second whole-time director.

According to the RBI, the growing complexity of the banking sector as well as succession planning due to the upper age limit stipulation of MD & CEO called for the need to appoint two whole-time directors on boards.

Banks that do not have the enabling provisions regarding appointment of two whole-time directors in their Articles of Association (AoA) were asked to seek necessary approvals to comply with the requirements.

Dhanlaxmi Bank and Tamilnad Mercantile Bank were required to revise the AoA before proposing the names to the regulator.

Sources said these two banks would need more time for sending their proposals to the regulator for the second whole-time director. The CEOs in both these banks have either resigned or their term ended, but they were asked to continue in their roles as they were the only whole-time directors on the board.

Dhanlaxmi informed the exchanges last month that the RBI had approved extension of MD & CEO J K Shivan’s term till his successor assumes the office. It has submitted its application to the regulator with the names of the candidates for the new MD & CEO.

“The bank has sought permission for six-month time for the appointment of a second whole-time director…we have not yet received approval for the MD itself. Going for the second whole-time director will take time,” said a source.

The bank is in the process of amending the AoA.

Typically, a bank first needs the board’s approval before seeking the RBI’s nod. After regulatory clearance, a bank will need shareholders’ approval for the second whole-time director.

Tamilnad Mercantile Bank had also submitted names for the new CEO, which the RBI is yet to clear.

City Union Bank has revised the AoA and is awaiting the RBI nod for the appointment. “We have modified the AoA to take care of the requirement and complied with the regulatory instructions,” N Kamakodi, MD & CEO, of City Union Bank told Business Standard indicating the bank has sent their proposals for a second WTD.  

IDFC First Bank said it had recommended the name of Pradeep Natarajan to the RBI for the second whole-time director. “We have not yet received approval from the regulator,” the lender told Business Standard.

DCB Bank, which recently received approval for the appointment of a new CEO, refrained from commenting on whether it had applied for a second whole-time director.  

SBM Bank India, the wholly-owned subsidiary of State Bank of Mauritius, has received RBI approval for a new CEO but does not have a second whole-time director. The bank has not responded to a query on the issue.

In November, the RBI had approved the name of Arun Khurana as Indusind Bank’s second whole-time director.