Aiming to provide stability at the top and retain talent, the government has raised the maximum tenure for chief executive officers (CEOs) and managing directors at public sector banks to 10 years.

The initial period can be a maximum of five years, according to a notification in The Gazette of India. 

The reappointment for an extendable term of up to 10 years will be subject to a decision by the government, after consulting with the Reserve Bank of India (RBI).

This longevity in tenure will enable the top brass of public sector banks to adopt long-term strategies and ensure better accountability.

The central government has the right to terminate the term of office of a whole-time director, including the managing director, any time before the expiry of the term specified, by giving him a notice of not less than three months, in writing or three months' salary and allowances in lieu of notice.

"A whole-time director, including the managing director, shall devote his whole time to the affairs of the nationalised bank and shall hold office for such initial term not exceeding five years and extendable up to a total period, including the initial term, not exceeding 10 years, as the central government may, after consultation with the Reserve Bank, specify and shall be eligible for re-appointment," a government notification dated November 17, 2022, said.

The amendment, called Nationalised Banks (Management and Miscellaneous Provisions) Amendment Scheme of 2022, was introduced under the powers conferred to the government by section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

The government so far has been appointing managing directors and CEOs at public sector banks for a maximum period of three years or till they reach the age of 60 years, whichever is earlier. Reappointments are usually carried out by the government after the director's tenure ends and if they have not capped the maximum age limit.

The CEOs of private sector banks, in contrast, are allowed to work up to the age of 70. The RBI takes the decision to reappoint the CEO of a private sector bank CEO on the recommendation of the respective bank boards.