On Thursday, the Reserve Bank of India (RBI) released a discussion paper on 'Governance in Commercial Banks in India' for public comments. In it, the central bank proposed the term for bank chief executive officers (CEOs) to be capped at 10 years if they promoters or major shareholders of the entity.
The regulator is also considering a cap of 15 years for tenures of CEO who are non-promoters.
"To build a robust culture of sound governance practice, professional management of banks and to adopt the principle of separating ownership from management, it is desirable to limit the tenure of the WTDs or CEOs. Therefore, it is felt 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 it's operations and to transition the managerial leadership to a professional management," RBI's paper said.
All private, public, small finance banks, payments banks and regional rural banks would have to comply with the new guidelines, if and when finalised within 2 years of the release of the final guidelines.
"On the date of issuance of the guideline/directions on the matter by the Reserve Bank (basis this discussion paper), banks with WTDs or CEO who have completed 10 or 15 years shall have two years or upto the expiry of the current tenure, whichever is later, to identify and appoint a successor," the paper said.
It was also proposed to keep the upper age limit for CEO/WTDs of banks as 70 years.
"Beyond this nobody can continue in the 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," the paper said.