RBI mandates min 2 Whole Time Directors in private, foreign banks to bolster governance

Mumbai, Oct 25, 2023 

Payments banks and local area banks are kept out of the minimum WTD requirements

In a move to strengthen governance in private sector banks and foreign banks, the Reserve Bank of India has mandated at least two wholetime directors (WTDs) in these banks. Those who do not meet the requirement need to submit the names for RBI's approval within four months.

Banks need prior RBI approval for the appointment of WTDs.

The regulator also asked banks to establish an effective senior management team to navigate ongoing and emerging challenges, given the growing complexities of the banking sector.

"Establishment of such a team may also facilitate succession planning, especially in the background of the regulatory stipulations in respect of tenure and upper age limit for Managing Director and Chief Executive Officer (MD&CEO) positions," RBI said in a notification on Wednesday.

RBI said the number of WTDs should be decided by the board of the bank by taking into account factors such as the size of operations, business complexity and other relevant aspects.

"In compliance with these instructions, banks that currently do not meet the minimum requirement as above are advised to submit their proposals for the appointment of WTD(s) under Section 35B(1)(b) of the Banking Regulation Act, 1949, within a period of four months from the date of issuance of this circular," RBI said.

Those banks which do not already have the enabling provisions regarding the appointment of WTDs in their Articles of Association may first seek necessary approvals under Section 35B(1)(a) of the Act ibid, expeditiously, so as to be in a position to comply with the requirements under these instructions, the notification said.

Payments banks and local area banks are kept out of the minimum WTD requirements.

[The Business Standard]