The Reserve Bank of India’s move to raise the age of retirement for heads of private sector banks, as well as CEOs and other whole-time directors, from 65 to 70 years is welcome. By doing so, it has aligned the provisions of the Banking Regulation Act with the new Companies Act. The move has paved the way for several major private sector banks to continue with their current and extremely successful chief executives. However, by leaving out public sector banks (PSBs) from the purview of this order, the banking regulator has only partially addressed the issue. Since PSB chiefs (and whole-time directors) are treated on par with their counterparts in government, they continue to retire at the age of 60. This has led to a severe shortage of talent in PSBs. Public sector banks are struggling to cope with the problems caused by the loss of experienced hands, not just at the helm — as many as six PSB chiefs are retiring between now and the end of the current fiscal — but more critically, at the operational level. A study by consultancy major McKinsey estimated that 87 per cent of general managers/executive vice-presidents of public sector banks would have retired by 2016-17, and 100 per cent (of those currently in that rank) would be gone by 2020. Any industry will find it difficult to cope with that level of loss of talent and experience.

The Centre should revisit the issue of the age of retirement, other than in areas where experience does not count for much or where physical fitness (the armed forces for example) is a critical factor. A low age of retirement made some sense in a time when a near-stagnant economy was unable to create enough jobs, forcing the Government to become the largest employer. The growth and structure of employment remain a matter of serious concern, but the increased longevity of the population as a whole demands a more nuanced approach to the issue of retirement.

One may argue that advancing age diminishes a person’s capacity to effectively discharge his or her functions, but there’s no evidence to suggest that younger people in leadership roles perform better than their older counterparts. There is no denying that younger people can bring fresh ideas and new energy to a business. But one must remember that Warren Buffett and Rupert Murdoch are in their 80s and still running successful mega enterprises. There are several functions where experience incrementally adds to knowledge, like the judiciary or academia. Ideally, the age at which the head of a business retires should remain within the purview of the shareholders of that business. If they feel that their business interests are being effectively pursued by the person in charge, they should be allowed to continue.

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