RBI Mandates Minimum Two Whole-Time Directors for Indian Banks

October 26, 2023

The Reserve Bank of India (RBI) has introduced a crucial requirement for Indian banks, stating that they must now have a minimum of two whole-time directors (WTDs) on their boards. This mandate extends to the Managing Director and Chief Executive Officer (MD&CEO) position.

Addressing Banking Sector Complexity

In a recent statement, the RBI highlighted the importance of establishing effective senior management teams in banks. This move aims to help banks navigate the growing complexity within the banking sector and effectively tackle emerging challenges. Notably, this directive applies to both private banks and wholly-owned subsidiaries of foreign banks.

Determining the Number of WTDs

The RBI has granted flexibility in determining the number of WTDs on each bank’s board. Banks are tasked with making this decision, taking into consideration factors like the bank’s operational size, business complexity, and other relevant aspects.

Timelines for Compliance

Banks that currently do not meet the RBI’s new requirement must promptly submit proposals for the appointment of WTDs within four months of receiving this directive. Additionally, banks lacking provisions for the appointment of WTDs in their Articles of Association are urged to seek the necessary approvals to meet these requirements. They are also expected to comply with other relevant statutory and regulatory provisions.

Holistic Compliance Approach

While ensuring compliance with the RBI’s directive, banks are reminded to give careful consideration to meeting requirements under other applicable statutory and regulatory provisions. This holistic approach ensures that banks maintain a strong governance structure and adhere to all necessary guidelines.

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