Chairman of Banking Company – Tenure, Qualification

September 13, 2019

As per provisions of Section 10B of Banking Regulation Act, 1949, every banking company should appoint a whole-time or a part-time Chairman of Banking Company selected among its Directors. If he is appointed on a whole-time basis, then he must be entrusted with the management of the whole of the affairs of the banking company. The Chairman must exercise his powers subject to the superintendence, control and direction of the board of Directors. The prior approval of the Reserve Bank must be taken if Chairman is appointed on part-time and Managing Director of banking company must manage the whole affairs of the bank subject to the superintendence, control and direction of the board of Directors.

The Chairman may continue as Director of a subsidiary of the banking company or a Director of a company registered under section 25 of the Companies Act, 1956.

chairman of banking company

Tenure of Chairman of Banking Company

The whole time Chairman of banking company can hold office for period not exceeding five years provided he is eligible for reappointment.

Qualification of Chairman of Banking Company

The whole time Chairman or Managing Director of a banking company must possess special knowledge and practical experience of the working of a banking company, or of the State Bank of India or any subsidiary bank or a financial institution or financial, economic or business administration.

A person is disqualified for whole time Chairman or Managing Director if he:

  • is a Director of any company other than a company who is subsidiary of the banking company or a Director of a company registered under section 25 of the Companies Act, 1956
  • is a partner of any firm which carries on any trade, business or industry
  • has substantial interest in any other company or firm
  • is a Director, manager, Managing agent, partner or proprietor of any trading, commercial or industrial concern
  • is engaged in any other business or vocation

Removal of Chairman of Banking Company

If RBI is of opinion that Chairman/Managing Director of banking company is not a fit and proper person to hold office then after giving such person and to the banking company a reasonable opportunity of being heard, the RBI may require the banking company to appoint any other suitable person as Chairman/Managing Directo. However if banking company fails to appoint such person with in period of two months, then Reserve Bank may appoint a suitable person and person so appointed shall hold office for the residue of the period of office of the person in whose place he has been so elected or appointed. The person person against whom an order of removal is made, may, within thirty days from the date of communication to it or to him of the order, prefer an appeal to the Central Government and the decision of the Central Government shall be final and shall not be called into question in any court.

If Chairman/Managing Director of banking company dies or resigns or is by infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise in circumstances not involving the vacation of his office, the banking company with the approval of the Reserve Bank, make suitable arrangements for a total period not exceeding four months

Power of Reserve Bank to appoint Chairman/Managing Director of Banking Company

By any chance if office of the Chairman/Managing Director of Banking Company falls vacant and continuation of such vacancy is likely to adversely affect the interests of the banking company, then Reserve Bank may appoint a person to be Chairman/Managing Director of Banking Company. The person so appointed shall be deemed to be Director of the banking company. He shall be treated as whole- time employment of the banking company and shall hold office for such period not exceeding three years and shall be eligible for re-appointment. He shall draw such pay and allowances as the Reserve Bank may determine and may be removed from office only by the Reserve Bank

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