Chairman posts vacant in six of 11 public sector banks, some for two years

At a time when the Reserve Bank of India (RBI) has been underscoring the need for governance in commercial banks, six of 11 public sector banks (PSBs) still do not have a non-executive chairman. Some of these posts have been lying vacant for more than two years.

UCO Bank, Bank of Maharashtra, Bank of India, Indian Overseas Bank, Indian Bank, and Central Bank of India do not have a non-executive chairman.

UCO Bank and Bank of Maharashtra never had a part-time chairman since the process of splitting the chairman and managing director (MD) posts started in 2015.

Moreover, there are not many independent directors in most PSBs. In most banks, board members would include the MD and chief executive officer (CEO), and the executive directors (EDs). Some banks have three to four EDs, the RBI and government nominee director, shareholder director and one, or in some cases, two independent directors.

The issue of vacant chairman positions in PSBs was raised during the RBI governor’s interaction with the board members of PSBs last month. In a first-of-its-kind exercise, the RBI governor and the senior management met all board members of public and private sector banks separately in May.

In his inaugural address at the conference, RBI Governor Shaktikanta Das said he took the opportunity to convey the regulator’s expectations from the boards of directors of banks and explained the multi-dimensional responsibility of individual directors.

Comparing the role of a bank chairperson to the captain of a ship, Das said, “For the chairperson to be able to navigate the board discussions and functions in the right direction, he/she should possess the requisite experience, competencies, and personal qualities.”

Das also said that the larger purpose of the board was to provide clear and consistent direction to banks.

“It is the responsibility of the board to ensure that the processes and systems in the bank facilitate effective decision-making and good governance, which should also percolate down through the bank,” he said.

Bankers also raised the issue of compensation to directors, particularly of MDs and CEOs and highlighted the remuneration of state-own bank chiefs being less than their private-sector counterparts.

Bankers said that RBI officials agreed on the issue of compensation but said such matters were decided by the government. Sources said banks highlighted the need for a formal incentive system for employees so that they may be rewarded for their performance.