Government has decided to provide longer tenure to Managing Director and other whole-time directors of the public sector banks. Now the appointment can be made initially for up to 5 years, which can be extended for the same number of years. The present norms prescribe appointment for three years or till the age of 60 years, whichever is earlier.

A notification has been issued on November 17 to amend Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1970.

“A whole-time Director, including the Managing Director, shall devote his whole-time to the affairs of the nationalised bank and shall hold office for such initial term not exceeding five years and extendable up to a total period, including the initial term, not exceeding ten years, as the Central Government may, after consultation with the Reserve Bank, specify and shall be eligible for re-appointment,” a notification issued by the Finance Ministry said.

Though no reason has been given for longer tenure, it is believed to have been done to ensure consistency and continuity in the PSB’s functioning. These are critical as banks are facing tough competition among themselves. At the same time, there has been demand for making bank competitive at global level requiring longer term for key decision makers, among others.

According to the Financial Services Department, a MD and CEO has four key responsibilities and duties. He is required to establish vision, mission and values in consultation with Board of Directors, to set strategy and structure, to monitor and control and to exercise accountability to shareholders and responsibility towards the stakeholders .   

As on date, there are 12 public sector banks such as State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank beside others. Original scheme envisaged that a whole-time Director, including the Managing Director shall devote his whole-time to the affairs of the Nationalised Bank and shall hold office for such terms not exceeding five years. Later the term of MD cut down to 3 years.

The Government appoints Managing Directors from Whole-time Directors (WTD) of a public sector banks after vigilance clearance, etc. Name of these WTDs are recommended by the Financial Services Institutions Bureau (FSIB).