RBI fixes private bank MD, CEO tenures at 15 years; compliance by Oct 1

 The rules apply to private banks, small finance banks, and wholly-owned subsidiaries of foreign banks.

The Reserve Bank of India (RBI) on Monday capped the tenure of managing directors (MDs) and chief executive officers (CEOs) of private banks at 15 years. Promoters or major shareholders, however, cannot hold these posts for more than 12 years, but the RBI can choose to give them a three-year extension under extraordinary circumstances.

In its draft guidelines issued last year, the central bank had proposed a maximum of 10 years for promoter shareholders as MD and CEO.

According to the RBI’s latest guidelines on corporate governance in banks, after the completion of their term, professional MDs & CEOs or whole-time directors will be eligible for re-appointment in the same bank after a minimum gap of three years. During the cooling-off period, they should not be associated with the bank or its group entities in any capacity, either directly or indirectly.

The rules apply to private banks, small finance banks, and wholly-owned subsidiaries of foreign banks.

The RBI will issue norms for other banks separately.

Banks have to comply with the instructions latest by October 1.