Chairman and Directors of Banking Companies

Published on January 08, 2018
Chairman and Directors of Banking Companies
Today we are going to see the appointment and their employment restrictions of chairman and directors of the banking companies of India. Let us see that----- 

Chairman and Managing Directors:

  • Every banking companies in India should be managed by the whole – time chairman. The chairman was appointed from the board of directors on a whole-time basis who was going to exercise all his/her powers subject to the superintendence, control, and directions of the board of directors for the smooth functions of the affairs of that banking company. If the chairman was appointed on the part-time basis, the banking company should get prior approval from the Reserve Bank of India. Every chairman appointed on whole-time basis should hold office for up to 5 years only and also he/she must be eligible for reappointing through re-election. He/she should have special knowledge and practical experience of the working of a banking company and also knowledge about the financial, economic or business administration. He/she might be disqualified from the post of the chairman because if the chairman was a director in any other company or partner in any other company or having the substantial interest in a rival company or engaged in any other business or vocation. The chairman at any time might in writing under his hand addressed to the company about his/her resignation. 
  • If the chairman appointed for whole-time basis shouldn't be a fit and the right person for that role, after giving the hearing opportunity for both chairman and that banking company, it might require to appoint or elect another person as chairman within the period of 2 months from the date of receipt of that order. If the banking company was failed to appoint or elect another person as chairman, the reserve bank by order might remove that person from the chairman of the board and appoint new person as a chairman of the board for the residue of the period of office of the person in whose place he/she was appointed/elected as a chairman. The chairman who was got the order of removal from that banking company might within 30 days made the appeal to the central government and the decision of the central government and the order of the RBI should be final. 
  • The reserve bank might order any person as a chairman to under such part-time as honorary work without interfering with his/her duties. If the chairman might become died or resigns or become an incapable person to do his/her duties or absent of leave, the banking company might with the approval from the RBI take necessary steps within the period of 4 months. 
  • The Reserve Bank of India also had all the power to appoint the chairman of any banking company for the period of not exceeding 3 years to hold his/her office in that company. 
  • The above said provisions were also applicable to the managing director, whole-time director, and director of the banking company. So the chairman, managing director, and director of that banking company shouldn’t hold any qualification shares in that banking company. 

Board of Directors:

  • The board of directors should have a special knowledge and experience in accountancy, agricultural and rural economy, banking, cooperation, economics, finance, law and small-scale industry. But the board of directors was disqualified if they were the director of any other company or partner in any other company or having the substantial interest in a rival company or engaged in any other business or vocation. Also, no directors hold office for more than 8 years in any one banking company. If the any one director's power was ceased, he/she can't appoint/elect for the period of 4 years. Also, this would lead to reconstitute the board. 


  • All the above provisions were done in section 10 of the banking regulation act 1949. With this provisions, all the managing persons were nominated.
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Ramandeep Singh is a seasoned educator and banking exam expert at BankExamsToday. With a passion for simplifying complex concepts, he has been instrumental in helping numerous aspirants achieve their banking career goals. His expertise and dedication make him a trusted guide in the journey to banking success.

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