MUMBAI: The RBI has proposed an upper age limit of 70 years for CEOs and whole-time directors of banks and a maximum term of 10 years for those belonging to the promoter group, as part of the exercise to improve governance in the banking sector.
The discussion paper released by the Reserve Bank of India (RBI) on Thursday said that chief executive officers (CEOs) and whole time directors (WTDs) belonging to the promoter group should pass on the managerial leadership to professionals after 10 years ..
“The upper age limit for CEO/WTDs of banks is 70 years. Beyond this nobody can continue in that post. Within the overall limit of 70 years, individual bank’s board can prescribe, as an internal policy, a lower age limit for CEO/WTDs,” said the discussion paper on which the RBI has invited comments from various stakeholders by July 15, 2020.
In order to introduce a robust culture of sound governance practice and adopt the principle of separating ownership from management, the paper said “ it is desirable to limit the tenure of the WTDs or CEOs”.
It further said that “10 years is an adequate time limit for a promoter/ major shareholder of a bank as WTD or CEO of the bank to stabilise its operations and to transition the managerial leadership to a professional management. This will not only help in achieving the separation of ownership from management but also reinforce a culture of professional management”.
A management functionary “who is not a promoter/major shareholder can be a WTD or CEO of a bank for 15 consecutive years”, the paper said, adding thereafter, the individual could be eligible for re-appointment as WTD or CEO only after the expiration of three years.