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RBI to tighten private banks' succession planning with stricter timeline

RBI to tighten private banks' succession planning with stricter timeline

The Reserve Bank of India (RBI) may stipulate stricter timelines to identify the managing director (MD) and chief executive officer (CEO)-designates in private banks and for them to settle down in their new roles. Extensions for current corner-room occupants could be linked to how robust the succession planning at the banks they helm is. 

Corner-room aspirants’ ‘demonstrable record of running significant commercial operations’, their board experience, and contribution to its deliberations will be key factors which could be taken into account by the central bank when evaluating candidature. The onus on the nomination and remuneration committee of banks is set to go up, even as private bank boards will have to engage deeper in succession planning. 

Succession planning at private banks is not hard-coded, and the central bank wants to ensure smooth baton changes. Also, cut down on ‘key personnel risks’, which pencil in contingency plans for outlier events. 

Succession planning is to go beyond what a private bank currently defines as its ‘top management’, and there is to be an identifiable second-in-command well ahead of an incumbent boss’ term comes to an end. Not many private banks have a deputy MD and CEO

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