Tag: whole time directors

RBI restricts continuous tenure of UCB MDs to 15 years, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Mumbai: The Reserve Bank of India has limited the maximum continued term of managing directors and whole-time directors (WTD) of urban cooperative banks (UCBs) to 15 years in a series of steps taken to ensure professional management of these institutions that have often been found undertaking non-transparent activities right at the top.

In the latest directions given by the RBI on appointment, re-appointment and termination process of MD and WTD of UCBs, the apex bank has said that an individual will be eligible for re-appointment as MD/WTD in the same bank even after finishing continuous 15-year tenure but only after a minimum gap of three years, subject to meeting other conditions.

Moreover, during this three-year cooling period, the individual shall not be appointed or associated with the bank in any capacity, either directly or indirectly.

In general, the RBI has directed that the tenure of MD/WTD shall not be for a period more than five years at a time subject to a minimum period of three years at the time of the first appointment unless terminated or removed earlier, and shall be eligible for re-appointment. The performance of MD/WTD shall be reviewed by the Board annually, the apex bank said.

The UCBs shall ensure that the following ‘fit and proper’ criteria are fulfilled by the person being appointed as MD. The MD shall function under the overall general superintendence, direction and control of the Board of Directors (BoD).

With regard to age, the RBI has said that the person at the top of UCBs should not be below the age of 35 years and above the age of 70 years at any time during his/her term in office. But, within the overall limit of 70 years, as part of their internal policy, individual bank Boards are free to prescribe a lower retirement age, the RBI said.

To run the operations professionally, the person should also have adequate educational qualifications. He/she should be a graduate, preferably, with Qualification in banking/ co-operative banking or Chartered/Cost Accountant/MBA (Finance); or Post-graduation in any discipline.

They must also have a combined experience of at least eight years at the middle/senior management level in the banking sector, including the experience gained in the concerned UCB, or non-banking finance companies engaged in lending (loan companies) and asset financing.

The person should not be engaged in any other business or vocation or beholding the position of a Member of Parliament or State Legislature or Municipal Corporation or Municipality or other local bodies. He/she should also not be a director of any company other than a company registered under section 8 of the Companies Act, 2013. The RBI has given a long list of propriety criteria to ensure only the right candidate is appointed for the post.

The RBI also said that UCBs shall constitute a “Nomination and Remuneration Committee (NRC)” consisting of three directors from amongst the Board of Directors (BoD) and nominate one among them as Chairman of the NRC.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

RBI prescribes qualifications for MDs, WTDs of urban cooperative banks, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The Reserve Bank on Friday prescribed educational qualifications and ‘fit and proper’ criteria for managing directors (MDs) and whole-time directors (WTDs) of primary urban cooperative banks and barred MPs and MLAs from these posts.

Issuing the guidelines for appointment of MDs and WTDs, the RBI said MPs, MLAs and representatives of municipal corporations will not be eligible to hold such positions in the primary urban cooperative banks (UCBs).

It further said the MD/WTD should be a post graduate or have qualifications in finance discipline. He or she could be either chartered/cost accountant, MBA (finance) or have a diploma in banking or cooperative business management.

The person should not be below 35 years of age or more than 70 years, it added.

“The person shall have a combined experience of at least eight years at the middle/senior management level in the banking sector (including the experience gained in the concerned UCB) or non-banking finance companies engaged in lending (loan companies) and asset financing,” the notification said.

Besides MPs, MLAs and representatives of municipal corporations and local bodies, persons engaged in business, trade or having substantial interest in any company too will not be eligible for appointment to such positions.

Regarding the tenure of appointment, it said the person can be appointed for a maximum of five years and will be eligible for re-appointment.

However, it said the MD or WTD will not hold the post for more than 15 years. After that, the person, if necessary, may be re-appointed after a three-year cooling period.

It further said the “UCBs whose existing MD/CEO has completed a tenure of five years may approach RBI either to seek re-appointment of the incumbent, if he/she is eligible, or for appointment of a new MD/CEO, within a period of two months…”.

In case a UCB decides to terminate the services of MD/ WTD before the expiry of tenure, it will have to seek prior approval of the Reserve Bank.

The directions are applicable to all Primary (Urban) Co-operative Banks, the RBI said.

In a separate circular, the RBI mandated the appointment of Chief Risk Officer (CRO) by UCBs with asset size of Rs 5,000 crore and above.

It is necessary that every UCB focuses its attention on putting in place appropriate risk management mechanism commensurate with its business profile and strategic objectives, it said.

“In this connection, it has been decided that all UCBs having asset size of Rs 5,000 crore or above, shall appoint a Chief Risk Officer (CRO). The Board must clearly define the CRO’s role and responsibilities and ensure that he/she functions independently,” the circular said.

The CRO should have direct reporting lines to MD/CEO or Board or the Risk Management Committee of the Board (RMC), it added.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

RBI’s CEO tenure cap: Here’s how it will impact Uday Kotak; HDFC Bank, ICICI Bank, Axis Bank safe

Personal Finance

[ad_1]

Read More/Less


Analysts believe that this development is marginally negative for Kotak Mahindra Bank, as Uday Kotak, the promoter MD and CEO, will not be eligible for reappointment once his term gets over.

The Reserve Bank of India’s (RBI) final guidelines on the tenure of bank MD, CEOs, or Whole Time Director (WTD) will apply to private lenders, small finance banks (SFBs), and wholly-owned subsidiaries of foreign banks. Under the new guidelines, the post of MD and CEO of a private bank cannot be held by the same individual for more than 15 years in one go. While, in the case of a promoter MD/CEO, the tenure will be capped at 12 years. RBI has noted that under special circumstances and at the discretion of the apex bank, the term for promoter CEO may be extended up to 15 years. “Banks such as HDFC Bank, ICICI Bank, and IndusInd Bank had a change at the helm in the recent past. However, banks like Kotak Mahindra Bank, DCB Bank, City Union Bank, Federal Bank, and RBL Bank have long-running tenures (+10 yrs) of the current MDs,” said Siji Philip and Dnyanada Vaidya, research analysts, Axis Securities.

RBI guidelines negative for Kotak Mahindra Bank

For Kotak Mahindra Bank and City Union Bank, the term extension has already been done till 2024 and 2026, respectively. Analysts believe that this development is marginally negative for Kotak Mahindra Bank, as Uday Kotak, the promoter MD and CEO, will not be eligible for reappointment once his term gets over. However, he will continue to remain a stakeholder in the bank. Uday Kotak got reappointed on January 1, 2021, for a period of three years. “Hence, his tenure will now end on 1 Jan 2024 and he is not eligible for reappointment as he has already completed 15 years as the MD and CEO,” said Suresh Ganapathy, analyst at Macquarie Research in a note.

Banks to comply with RBI guidelines by Oct 1, 2021

Ganapathy also said that the second in line Dipak Gupta (current Joint MD) may not be eligible to succeed Kotak as the CEO as the 15 year cap applies for all whole-time directors (WTD) on the board. RBI circular also stated that the upper age limit for MD and CEO and WTDs in the private sector banks would continue and no person can continue as MD and CEO or WTD beyond the age of 70 years. Banks are permitted to comply with these instructions latest by October 01, 2021. It should be noted that banks with MD and CEOs or WTDs who have already completed 12 or 15 years as MD and CEO or WTD, on the mentioned date these instructions coming to effect, shall be allowed to complete their current term as already approved by the Reserve Bank.

Kotak Mahindra Bank shares were trading nearly 3 per cent higher at Rs 1,799 apiece on BSE in intraday deals on Wednesday. So far, a total of 46,000 shares have traded on BSE, while a total of 19.40 lakh shares have exchanged hands on NSE. RBI also clarified that the individual will be eligible for re-appointment as MD and CEO or WTD in the same bank, if considered necessary and desirable by the board, after a minimum gap of three years, subject to meeting other conditions. “During this three-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,” RBI said.

HDFC Bank, ICICI Bank, Axis Bank seem fine

According to Ganapathy, the CEOs of HDFC Bank, ICICI Bank and Axis Bank have plenty of time and can be the CEO for more than a decade as they were appointed as the CEO recently. HDFC Bank CEO took charge last year whereas ICICI Bank CEO took charge a couple of years ago. Similarly, Axis CEO also can be the CEO for more than a decade.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , , ,