RBI relents on Nayak appointment

The Reserve Bank of India (RBI) has finally retreated from its position that UTI Bank split the post of chairman and managing director when the incumbent P J Nayak's term ends on July 31, 2007.

The banking regulator has now cleared Nayak's appointment as chairman and chief executive officer (CEO) for two years ending July 31, 2009, after first opposing, in April 2007, his continuation as chairman and managing director.

The RBI has in its letter, however, stated that the bank should split the post of chairman and CEO after Nayak's fresh term ends, banking sources said.

The RBI had earlier rejected the bank board's decision to extend Nayak's term by two years, saying the post of chairman and managing director should be bifurcated in accordance with corporate governance norms set out by the Ganguly Committee Report and international best practices.

Nayak had even announced his exit from the bank after July 31, 2007, but the bank board ratified his re-appointment as whole-time director and designated him chairman in May.

The board used the provisions of section 10(B) of the Banking Regulation Act as a shield.