Chief Executive Officers (CEOs) who have completed their 15-year tenure will now be eligible for reappointment as Managing Directors (MD) / CEOs after a period of three years, the Reserve Bank of India said in a statement on April 26.
During this three-year cool off period, they will not be associated with the bank or any of its entities, it said.
"Subject to the statutory approvals required from time to time, the post of the MD&CEO or WTD cannot be held by the same incumbent for more than 15 years. Thereafter, the individual will be eligible for re-appointment as MD&CEO or WTD in the same bank, if considered necessary and desirable by the board, after a minimum gap of three years, subject to meeting other conditions. During this three-year cooling period, the individual shall not be appointed or associated with the bank or its group entities in any capacity, either directly or indirectly," the central bank said.
WTD stands for Whole-time Director.
Those MDs and CEOs who are also promoters or majority shareholders, cannot serve in these positions for longer than 12 years, the central bank said.
However, at the discretion of the central bank they may be allowed to continue up to 15 years.
"However, in extraordinary circumstances, at the sole discretion of the Reserve Bank such MD&CEO or WTDs may be allowed to continue up to 15 years," the statement reads.
While examining the matter of re-appointment of such MD&CEOs or WTDs within the 12/15 years period, the level of progress, adherence to RBI’s promoter shareholding norms will be factored into the decision making process by the central bank.
The RBI also clarified that the extant instructions on the upper age limit for those serving as MDs and CEOs will continue. As a result, no person can continue in these roles within the private sector banks beyond the age of 70.
These conditions will not be applicable to those foreign banks that have branches in India, the RBI said.
As regards chairs and meetings of the board, the central bank has said that the Chair of the board shall be an independent director.
"In the absence of the Chair of the board, the meetings of the board shall be chaired by an independent director," it said, adding that at least half of the directors attending the meetings of the board shall be independent directors.
RBI has also said that the Audit Committee of the Board (ACB), shall be constituted with only non-executive directors (NEDs). The chair of board shall not be a member of the ACB, it said, adding that at least two-thirds of the members attending the meeting of the ACB shall be independent directors.
"The meetings of the ACB shall be chaired by an independent director who shall not chair any other committee of the Board. The Chair of the ACB shall not be a member of any committee of the board which has a mandate of sanctioning credit exposures," it said.
As for the Risk Management Committee of the Board, (RMCB), at least half of the members attending the meeting of the RMCB shall be independent directors of which at least one member shall have professional expertise qualification in risk management, the statement added.
As regards to the age limit for non-executive directors (NEDs), the RBI has said that the upper age limit for them, including the Chair of the board, shall be 75 years and after attaining the age of 75 years no person can continue in these positions.
"The total tenure of a NED, continuously or otherwise, on the board of a bank, shall not exceed eight years. After completing eight years on the board of a bank the person may be considered for re-appointment only after a minimum gap of three years," it said.