The government has raised the maximum tenure for managing directors and chief executive officers of public sector banks to 10 years as the Centre looks to attract top talent at PSBs.
As per a government notification dated November 17, 2022, the term for the appointment has been extended to 10 years, from the earlier 5 years, subject to superannuation age of 60 years.
"A whole-time director, including the managing director, shall devote his whole time to the affairs of the nationalised bank and shall hold office for such initial term not exceeding five years and extendable up to a total period, including the initial term, not exceeding 10 years, as the central government may, after consultation with the Reserve Bank, specify and shall be eligible for re-appointment," the notification said.
The amendment has been called Nationalised Banks (Management and Miscellaneous Provisions) Amendment Scheme, 2022.
Up until now, the government had been appointing managing directors and chief executive officers at public sector banks for a maximum period of five years or till they reach the age of 60 years, whichever is earlier. Reappointments are generally decided by the government after the director's tenure ends and if they have not reached the maximum age limit.
The government has the right to terminate the term of office of a whole-time director, including the managing director, any time before the expiry of the term specified, by giving him a notice of not less than three months, in writing or three months' salary and allowances in lieu of notice.
The move is expected to help state-run banks to retain top talent.
On Wednesday, Reserve Bank of India governor Shaktikanta Das held meetings with the MDs and CEOs of public sector banks and certain private sector banks. The meetings were also attended by deputy governor M.K. Jain along with a few senior officials of the RBI.
The RBI governor acknowledged the crucial role played by the commercial banks in supporting the economic growth throughout the turbulent times since the outbreak of pandemic and the ongoing financial market turmoil.
He further stated that despite challenges, the Indian banking sector has remained resilient and continued to improve in various performance parameters. He advised the banks to remain watchful of the evolving macroeconomic situation, including global spillovers, and take mitigating measures proactively so that the potential impact on their balance sheets is minimised and financial stability risks are contained.
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