Reserve Bank of India, Wikimedia Commons.

The appointments, however, would increase compliance activities and management cost

By Roopa Kantamneni | November 17, 2023

One-third of private sector banks, which do not have two whole time directors on their board, have approached headhunters to find potential candidates before the Reserve Bank of India’s February deadline.

The RBI has mandated the appointment of these directors to strengthen governance within the private banks. Approval from the RBI is required for the appointment of whole-time directors, and the deadline for compliance is February 2024.

“The banks are in the process of appointing the new wholetime directors for an effective framework banking system with emerging challenges,” said Jayaraman from City Union Bank.

Currently, one-third of private sector banks do not have the required two full-time directors. Banks such as IndusInd Bank, City Union Bank, South Indian Bank, Dhanlaxmi Bank, CSB Bank, and DCB Bank are among those yet to make these appointments.

Of these three banks – CSB Bank, City Union Bank and South Indian Bank – said they are actively looking to appoint whole-time directors. IndusInd Bank, Dhanlaxmi Bank, and DCB Bank did not immediately respond to emails. 

Some banks like South Indian Bank are also looking for special recruiters to help fulfil the RBI norm, according to a senior bank official who didn’t want to be named. 

The appointments, however, would increase compliance activities and appointment costs, and managerial remunerations subject to regulatory approval, said Ramesh Venkataraman, Company Secretary of City Union Bank.

“It seems a big challenge for the banks having only one wholetime director to initiate the search activity and comply with all statutory and regulatory formalities for an appointment within a short span of four months,” said Ramesh Venkataraman, Company Secretary of City Union Bank. 

The appointment of the two wholetime directors should be reflected in the Articles of Association. This facilitates the regulatory stipulations with respect to tenure and upper age limit for managing director and chief executive officer positions. 

Emails sent to IndusInd Bank, Dhanalakshmi Bank and DCB Bank remained unanswered.

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