The Hindu Business Line : New norms for non-official bank directors await Cabinet panel nod

THE proposed changes in the norms governing appointment of non-official directors in public sector banks are likely to come into force only after being cleared by the Appointments Committee of Cabinet.

The committee's clearance for the revised norms has been necessitated on the advise of the Department of Personnel and Training (DoPT), which has pointed out to the Ministry of Finance that this would accord formal backing from the highest quarters for the proposed alternations.

The move comes after a set of revised guidelines proposed by the Finance Ministry earlier this year had met with stiff resistance from existing non-official directors of the banks who have been unhappy at the proposed changes in the eligibility criteria.

The lobbying has been so intense that the Prime Minister's Office (PMO) too has been dragged in to intervene to iron out the differences.

"The DoPT had advised us that the norms should be cleared by the committee. The PMO also has asked for the details on the proposed changes," senior officials told Business Line.

The norms are being finalised in accordance with the recommendations of the Dr A.S. Ganguly Committee that had made wide-ranging changes in the composition of the boards of banks and the manner of appointment of directors.

Incidentally, the Finance Minister, Mr P Chidambaram, recently said that the new norms are on the verge of being finalised.

What had irked the existing non-official directors has been the proposed shrinking of the age span for eligibility to 40-60 years from the existing 35-65.

The Finance Ministry had also proposed that no person should be appointed "continuously or intermittently" as directors for more than two terms.

The two terms could be in one PSU bank or in two different banks and would include any term served as director in a State-owned bank even if it was in the capacity as a shareholder director.

"The proposed norms were not acceptable to existing directors who would have to go out office if the new age limit came into play or if they had already served two terms as nominee directors in the banks," officials said.

The Government appoints all directors of PSU banks other than shareholder-directors.

Those appointed by the Centre include whole-time directors (the Chairman and Managing Director and the Executive Director), the officers' and workmen directors and other non-official directors.

On an average a bank board has about a dozen directors with the number of shareholder-directors being linked to extent of dilution of Government stake in the bank.

A maximum of six shareholder-directors are allowed in banks with more than 40 per cent public shareholding.

More Stories on : Public Sector Banks | Financial Policy

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