PNB convenes EGM to elect a 2nd shareholder director to its Board

Punjab National Bank (PNB), the country’s second largest public sector bank, has convened an extraordinary general meeting (EGM) on March 17 to elect ‘one shareholder director’. This will be a virtual meeting of shareholders.

This move is significant as the bank is now looking to rope in its second shareholder director on the strength of a recent Finance Ministry decision empowering Public Sector Banks ( PSB) boards to act on the decisions that remained held up at various board-level committees due to lack of quorum arising from vacancies or recusal by existing directors.

A shareholder director is one who is elected from among shareholders other than central government. A public sector bank has two main categories of shareholders— central government and ‘other shareholders’ (public shareholders). In India, all the public sector banks are listed entities although none of them are registered as companies under the Companies Act. There are separate legislations that govern the Board composition of such PSBs.

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The elected shareholder director is finally appointed by the Nomination and Remuneration Committee (NRC) of the bank Board concerned. PNB currently does not have the requisite NRC strength and is therefore looking to get another shareholder director through Board approval route after election of such a director by the shareholders of the bank at an EGM.

PNB has moved to get another shareholder director after its recent nearly ₹3,788 crore qualified institutional placement (QIP), which saw the centre’s shareholding in the bank drop from 85.59 per cent to 76.87 per cent. With the Centre’s shareholding coming down, PNB became technically eligible to have two shareholder directors.

Having an additional shareholder director on a Board is useful for Banks like PNB as all shareholder directors are counted as independent directors for the purpose of compliance with SEBI regulations for listed entities.

In Boards of public sector banks, there are executive directors appointed by central government, there is government nominee director (official of central government), there is a RBI nominee director, two employee directors ( representing workmen and officers) and other directors (shareholder directors).

This will be the second shareholder director for PNB besides Asha Bhandarker, who was elected on September 12,2018 for a period of three years.