Government Raises Maximum Tenure Of PSB MDs To 10 Years

The government has raised the maximum tenure for whole-time directors, including managing directors, at public sector banks to 10 years. This is the first time that the government has introduced a maximum cap for managing directors at state-owned lenders.

The government has allowed the appointment of these directors for a maximum initial period of five years, according to a notification in The Gazette of India. The term is now extendable up to 10 years.

The reappointment is subject to a decision by the government, after consultation with the Reserve Bank of India.

The Nationalised Banks (Management and Miscellaneous Provisions) Amendment Scheme of 2022 was introduced under the powers conferred to the government by section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

To be sure, the government had previously not specified any specific tenure limit for public sector bank chiefs.

So far, the government has been appointing managing directors and chief executive officers at public sector banks for a maximum period of three years or till they reach the age of 60 years, whichever is earlier. Reappointments are usually decided by the government after the director’s tenure ends and if they have not reached the maximum age limit.

The shorter tenures of public sector banks’ managing directors and chief executive officers have been a concern, as their private sector peers are allowed to work up to the age of 70. The decision to reappoint a private sector bank’s chief executive officer is taken by the RBI, on the recommendation of the respective bank boards.