Reserve Bank of India has made a comprehensive review of the framework for governance in commercial banks. Master Direction on Governance will be issued in due course, till then it has been decided to issue instructions regarding the chair of the board, composition of its committee, age, tenure and remuneration of directors/whole time director (WTD).
Following instruction has been made wide notification RBI/2021-22/24 DOR.GOV.REC.8/29.67.001/2021-22 dated 26-04-2021.
Applicability
- Private sector bank including Small Finance Bank.
- Wholly owned subsidy of Foreign Banks.
(In respect of State Bank of India and Nationalized Banks, these guidelines would apply to the extent the stipulations are not inconsistent with provisions of specific statutes applicable to these banks or instructions issued under the statutes)
Board
- Chair of the board - Independent Director.
- Quorum - 1/3rd of total strength or 3 (whichever is higher)
- At least half of the member should be independent director.
Committee of the board
- Audit committee of the board (ACB)
- Risk Management committee of the board (RMCB)
- Nomination and remuneration committee (NRC)
|
Particulars |
ACB |
RMCB |
NRC |
|
Number of Non-executive director |
All |
Maximum |
All |
|
Chairman |
Independent Director who shall not be chairman of other committee |
Independent Director who shall not be chairman of other committee along with having expertise in risk management |
Independent Director |
|
Quorum (no. of member) |
3 |
3 |
3 |
|
Number of Independent Director |
2/3rd of member attending |
1/2 of the member attending meeting |
1/2 of the member attending meeting and atleast one should be member of RMCB |
|
Number of meeting |
Once in a quarter |
Once in a quarter |
Held as & when required |
|
Member qualification |
All member should have ability to understand finance statement and atleast one member should have professional expertise |
Atleast one member should have expertise in Risk Management |
- |
Non-executive Director
- Maximum age - 75 years
- Total Tenure - continuous/otherwise for 8 years
- Cooling period - 3 years
- Remuneration - fixed upto Rs 20 Lakhs p.a., sitting fees and other as per statutory norms.
Tenure of MD & CEO or WTD
- Upper age limit - 70 year (for Private sector bank)
- Maximum tenure for 15 years
- Promoter/major shareholder’s tenure (who is MD/CEO/WTD) - 12 years
- Cooling period - 3 years
Transition arrangement
- Banks are permitted to comply with these instructions latest by October 01, 2021.
- If current chair of the board is not an independent director then they are allowed to complete current approved tenure by RBI.
- MD & CEO or WTD who already completed 12/15 years shall be allowed completing current approved tenure by RBI.
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