What changed
RBI has mandated a minimum of two Whole Time Directors (WTDs), including the MD&CEO, on the boards of private sector banks and wholly-owned subsidiaries of foreign banks. Previously, the 2021 guidelines did not specify a minimum number of WTDs. Banks must now ensure compliance within four months, with board discretion on the exact number based on size and complexity.
What it means for you
This move strengthens senior management teams to handle growing banking complexity and aids succession planning, especially given tenure and age limits for MD&CEOs. Banks with only one WTD must quickly appoint another, potentially requiring changes to Articles of Association and regulatory approvals under the Banking Regulation Act.
What you must do
- Assess current board composition to check if you have at least two WTDs including MD&CEO.
- If not, prepare and submit proposals for new WTD appointments under Section 35B(1)(b) within four months.
- If Articles of Association lack enabling provisions, seek approvals under Section 35B(1)(a) expeditiously.
- Ensure all appointments comply with other statutory and regulatory requirements.
Who it affects
All private sector banks, Wholly-owned subsidiaries of foreign banks (excluding payment banks and local area banks), Bank boards and nomination committees, Senior management and HR teams
What is the deadline for compliance?
Banks must submit proposals for appointing additional WTDs within four months from October 25, 2023, the date of the circular.
Does the board have flexibility on the number of WTDs?
Yes, the board decides the exact number of WTDs based on factors like size, business complexity, and other relevant aspects, but at least two including the MD&CEO are mandatory.
What if our Articles of Association don't allow WTD appointments?
Banks must first seek approval under Section 35B(1)(a) of the Banking Regulation Act to amend the Articles, and then proceed with appointments under Section 35B(1)(b).