Skip to main content

Corporate Governance in Banks - Appointment of Directors and Constitution of Committees of the Board

Reserve Bank of India (RBI) had issued instructions on certain aspects of corporate governance in banks.

To whom are the instructions applicable?

The instructions are applicable to –

  • Private Sector Banks including Small Finance Banks (SFBs) and Payment Banks (PBs)
  • Wholly owned subsidiaries of Foreign Banks

In respect of State Bank of India and Nationalised Banks, the guidelines are applicable to the extent they are not inconsistent with provisions of specific statutes applicable to these banks or instructions issued under the statutes. 

The instructions are not applicable to foreign banks operating as branches in India. 

What are the instructions on Chair and meetings of the Board?

  • The Chair of the board shall be an independent director. 
  • In the absence of the Chair of the board, the meetings of the board shall be chaired by an independent director. 
  • The quorum for the board meetings shall be 1/3rd of the total strength of the board or 3 directors, whichever is higher. 
  • At least half of the directors attending the meetings of the board shall be independent directors.

Which are the Committees of the Board?

Particulars Audit Committee of the Board (ACB) Risk Management Committee of the Board (RMCB) Nomination and Remuneration Committee (NRC)
Constitution of the committee Only non-executive directors.
Chair of the board shall not be member of ACB. 		Majority of non-executive directors.
Chair of the board may be a member of RMCB only if he / she has the requisite risk management expertise. 		Only non-executive directors.
Chair of the committee Shall not be a member of any committee of the board which has a mandate of sanctioning credit exposures.

 

 Shall not be Chair of the board.
Type of attendees for the meeting of the committee At least 2/3rd of the members attending the meeting shall be independent directors. At least half of the members attending the meeting shall be independent directors of which at least 1 member shall have professional expertise / qualification in risk management. At least half of the members attending the meeting shall be independent directors, of which 1 shall be a member of RMCB.
Chair of the meeting of the committee An independent director who shall not chair any other committee of the Board. An independent director who shall not be a Chair of the board or any other committee of the board. An independent director.
Quorum for the meeting 3 members 3 members 3 members
Frequency of the meeting At least once in a quarter. At least once in each quarter. As and when required.
Other criteria for members of the committee All members should have the ability to understand all financial statements as well as the notes / reports attached thereto and at least one member shall have requisite professional expertise / qualification in financial accounting or financial management [e.g., experience in application of accounting standards and practices, including internal controls around it].

 

 

What shall be the age and tenure of non-executive directors?

  • The upper age limit for non-executive directors, including the Chair of the board, shall be 75 years.
  • The total tenure of non-executive directors, continuously or otherwise, on the board of a bank, shall not exceed 8 years. 
  • After completing 8 years on the board of a bank the person may be considered for re-appointment only after a minimum gap of 3 years. This will not preclude him / her from being appointed as a director in another bank.

What shall be the remuneration of non-executive directors?

  • In addition to sitting fees and expenses related to attending meetings of the board and its committees, the bank may pay compensation to non-executive directors in the form of a fixed remuneration commensurate with an individual director’s responsibilities and demands on time and which are considered sufficient to attract qualified competent individuals. 
  • However, such fixed remuneration for non-executive directors, other than the Chair of the board, shall not exceed ₹30 lakh per annum (earlier ₹20 lakh per annum).

What shall be the tenure of MD&CEO and WTDs?

  • The post of the Managing Director (MD) and Chief Executive Officer (CEO) or Whole Time Director (WTD) cannot be held by the same incumbent for more than 15 years. 
  • Thereafter, the individual will be eligible for re-appointment as MD&CEO or WTD in the same bank after a minimum gap of 3 years. 
  • During this 3-year cooling period, the individual shall not be appointed or associated with the bank or its group entities in any capacity, either directly or indirectly.
  • A person cannot continue as MD&CEO or WTD beyond the age of 70 years. 
  • MD&CEO or WTD who is also a promoter / major shareholder, cannot hold these posts for more than 12 years. However, in extraordinary circumstances, at the sole discretion of RBI such MD&CEO or WTDs may be allowed to continue up to 15 years. 
  • Banks shall ensure the presence of at least 2 WTDs, including the MD&CEO, on their Boards. 


References

Reserve Bank of India. (2021, April 26). 'Corporate Governance in Banks - Appointment of Directors and Constitution of Committees of the Board'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12078&Mode=0

Reserve Bank of India. (2023, October 25). 'Appointment of Whole-Time Director(s)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12551&Mode=0

Reserve Bank of India. (2024, February 09). 'Review of Fixed Remuneration granted to Non-Executive Directors (NEDs)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12607&Mode=0


Follow at - Telegram   Instagram   LinkedIn   X   Facebook

Labels:

Comments

Post a Comment

Popular Posts

Regulatory Measures for the Foreign Exchange Market

Reserve Bank of India (RBI) has announced regulatory measures for the foreign exchange market. Cancellation and rebooking / rollovers of foreign exchange derivative contracts An Authorised Dealer shall not permit users to rebook any foreign exchange derivative contract involving the INR, whether deliverable or non-deliverable, which has been cancelled with any of the Authorised Dealers. An Authorised Dealer may, however, continue to permit users to rollover foreign exchange derivative contracts on maturity, subject to compliance with the extant directions. Threshold limit for taking positions without requirement to establish the existence of underlying Authorised Dealers were permitted to allow users to take positions upto USD 100 million equivalent of notional value (outstanding at any point of time), across all Authorised Dealers, for hedging contracted exposure without the requirement to establish the existence of underlying exposure.  Further, a user was allowed to take positio...
Post a Comment
Read more

Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) (Updated as on September 11, 2026)

Reserve Bank of India (RBI) has issued the directions on maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) by banks. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Payments Banks (PBs) Local Area Banks (LABs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) District Central Co-operative Banks (DCCBs) What is CRR? Every bank shall maintain in India by way of cash reserve, a sum equivalent to such percent of its Net Demand and Time Liabilities (NDTL) in India, as the RBI in terms of Section 42(1) of the RBI Act, 1934 (for scheduled banks) and Section 18(1) of the Banking Regulation Act (BR Act), 1949 (for non-scheduled banks) [including provisions of Section 18(1) of the BR Act as applicable to co-operative banks], may specify. What is incremental CRR? In terms of Secti...
Post a Comment
Read more

Credit Facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs)

Reserve Bank of India (RBI) has issued guidelines on credit facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs). What are the guidelines on credit facilities to SCs & STs? District Level Consultative Committees formed under the Lead Bank Scheme should continue to be the principal mechanism of co-ordination between banks and development agencies.  National Scheduled Tribes Finance & Development Corporation and National Scheduled Castes Finance & Development Corporation have been set up under the administrative control of Ministry of Tribal Affairs and Ministry of Social Justice & Empowerment, respectively. Banks should advise their branches / controlling offices to render all the necessary institutional support to enable these institutions to achieve the desired objectives. Loans sanctioned to State Sponsored Organisations for Scheduled Castes / Scheduled Tribes for the specific purpose of purchase and supply of inputs and / or the marketing of the out...
Post a Comment
Read more

What is Ways and Means Advances (WMA)? (Updated as on September 25, 2026)

Reserve Bank of India (RBI) has recently announced the Ways and Means Advances (WMA) limit for the Government of India. So, what is WMA? What is Ways and Means Advances (WMA)? Ways and Means Advances (WMA) is a collateral free clean advance availed by the Central and State Governments from RBI, to tide over temporary mismatches in the receipts and payments. Section 17(5) of the Reserve Bank of India Act, 1934 empowers RBI to grant WMA to Central and State Governments, as and when required by them. What is Special WMA / Special Drawing Facility (SDF)? In addition to WMA, State Governments are also eligible for a Special Drawing Facility (SDF), which is granted against collateral of Government Securities held by the State Governments.  SDF availed by State Governments / UTs is linked to the quantum of their investments in marketable securities issued by the Government of India, including Auction Treasury Bills (ATBs).  (Updated as on June 28, 2024) Based on the recommendations m...
Post a Comment
Read more

Framework for Self-Regulatory Organisations in the FinTech Sector (Updated on September 10, 2026)

Reserve Bank of India (RBI) has released the framework for self-regulatory organisations in the FinTech sector. What are FinTechs? For the purpose of membership of an Self-Regulatory Organisations for FinTech Sector (SRO-FT), FinTechs may be defined as entities that provide technological solutions for delivery of financial products and services to businesses and consumers or encompass regulatory and supervisory compliance in partnership with traditional financial institutions or otherwise.  What is the need of Self-Regulatory Organisations for FinTech Sector? FinTechs play a pivotal role in redefining financial services by saving time, enhancing access, and lowering costs. While the FinTechs bring various innovations, the FinTech sector also raises concerns relating to customer protection, data privacy, cyber security, grievance handling, internal governance, financial system integrity, etc. A judicious balance between maximising the creative potential of FinTechs, while minimising...
Post a Comment
Read more