Private bank chiefs can work till 70: RBI

MUMBAI: In a move that will give HDFC Bank chief Aditya Puri and IndusInd Bank MD Romesh Sobti many more years at the helm, the RBI has said that bank chiefs and whole-time directors can stay on till 70. This is a major relaxation compared to the retirement age of 65 recommended by an RBI panel earlier this year.
In a communication to all banks on Tuesday, the RBI said that it has examined the matter relating to fixing an upper age limit for the post of managing directors, chief executive officers and whole-time directors of private banks in India. The central bank said that it has reviewed its position in light of the provisions of the Companies Act, 2013 [Section 196(3)] which prescribe that ‘no company shall appoint or continue the employment of any person as managing director, whole-time director or manager who is below the age of 21 years or has attained the age of 70 years’.
Last year, IndusInd Bank’s board cleared extension of Sobti’s tenure by another three years from February 2014. However, the RBI allowed only a year’s extension. The move triggered speculation that the RBI wanted to fix the retirement age at 65. This belief was reinforced after the committee to review corporate governance of board of banks in India, headed by former Axis Bank chief P J Nayak, submitted a report in May recommending a retirement age of 65 for CEOs and whole-time directors.
The private bank had also initiated a plan to identify a successor to Sobti in case the RBI accepted the committee’s recommendation. In recent months, there has also been speculation on who would possibly succeed Puri on the assumption that the maximum age limit for a CEO would be fixed at 65.
Among private bank chiefs, Puri (63) and Sobti (64) are the only ones who are above 60. CEOs of all other new generation private banks are below 60 years. Among the old generation bank, P G Jayakumar, MD of Dhanlaxmi Bank, and P Jayarama Bhat, MD of Karnataka Bank, are both 62 years old. Banking analysts say that the move is a positive for banking stocks as it ensures continuity of management.
Fixing the upper age limit at 70 years, the RBI said that within this limit, individual bank’s boards are free to prescribe a lower retirement age for the whole-time directors, including the MD & CEO, as an internal policy. The issue of retirement applies only to private banks as all public sector employees have a fixed retirement age of 60 years. In banking, the only exceptions are RBI deputy governors who have a maximum age limit of 62 years and the office of governor where the age limit is 65.