Here we will see Section 10 of The Banking Regulation Act.

Prohibition of employment of managing agents and restrictions on certain forms of employment.

(1) No banking company —

(a) shall employ or be managed by a managing agent; or

(b) shall employ or continue the employment of any person—

(i) who is, or at any time has been, adjudicated insolvent, or has suspended payment or has compounded with his creditors, or who is, or has been, convicted by a criminal court of an offence involving moral turpitude; or

(ii) whose remuneration or part of whose remuneration takes the form of commission or of a share in the profits of the company:

Provided that nothing contained in this subclause shall apply to the payment by a banking company of

(a) any bonus in pursuance of a settlement or award arrived at or made under any law relating to industrial disputes or in accordance with any scheme framed by such banking company or in accordance with the usual practice prevailing in banking business;

(b) any commission to any broker (including guarantee broker), cashiercontractor, clearing and forwarding agent, auctioneer or any other person, employed by the banking company under a contract otherwise than as a regular member of the staff of the company; or

(iii) whose remuneration is, in the opinion of the Reserve Bank, excessive; or

(c) shall be managed by any person

(i) who is a director of any other company not being

(a) a subsidiary of the banking company, or

(b) a company registered under section 25 of the Companies Act, 1956 (1 of 1956):

Provided that the prohibition in this subclause shall not apply in respect of any such director for a temporary period not exceeding three months or such further period not exceeding nine months as the Reserve Bank may allow; or

(ii) who is engaged in any other business or vocation; or

(iii) whose term of office as a person managing the company is for a period exceeding five years at any one time:

Provided that the term of office of any such person may be renewed or extended by further periods not exceeding five years on each occasion subject to the condition that such renewal or extension shall not be sanctioned earlier than two years from the date on which it is to come into force:

Provided also that where the term of office of such person is for an indefinite period, such term, unless it otherwise comes to an end earlier, shall come to an end immediately on the expiry of five years from the date of his appointment or on the expiry of three months from the date of commencement of section 8 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963), whichever is later:

Provided further that nothing in this clause shall apply to a director, other than the managing director, of a banking company by reason only of his being such director.

Explanation. For the purpose of subclause (iii) of clause (b), the expression remuneration, in relation to person employed or continued in employment, shall include salary, fees and perquisites but shall not include any allowances or other amounts paid to him for the purpose of reimbursing him in respect of the expenses actually incurred by him in the performance of his duties.

(2) In forming its opinion under subclause (iii) of clause (b) subsection (1), the Reserve Bank may have regard among other matters to the following:

(i) the financial condition and history of the banking company, its size and area of operation, its resources, the volume of its business, and the trend of its earning capacity;

(ii) the number of its branches or offices;

(iii) the qualifications, age and experience of the person concerned;

(iv) the remuneration paid to other persons employed by the banking company or to any person occupying a similar position in any other banking company similarly situated; and

(v) the interests of its depositors.

1[ 2*****

(6) Any decision or order of the Reserve Bank made under this section shall be final for all purposes.]

10A. Board of directors to include persons with professional or other experience.

(1) Notwithstanding anything contained in any other law for the time being in force, every banking company,

(a) in existence on the commencement of section 3 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), or

(b) which comes into existence thereafter, shall comply with the requirements of this section:

Provided that nothing contained in this subsection shall apply to a banking company referred to in clause (a) for a period of three months from such commencement.

(2) Not less than fiftyone per cent. of the total number of members of the Board of directors of a banking company shall consist of persons, who

(a) shall have special knowledge or practical experience in respect of one or more of the following matters, namely:

(i) accountancy,

(ii) agriculture and rural economy,

(iii) banking,

(iv) cooperation,

(v) economics,

(vi) finance,

(vii) law,

(viii) smallscale industry,

(ix) any other matter the special knowledge of, and practical experience in, which would, in the opinion of the Reserve Bank, be useful to the banking company:

Provided that out of the aforesaid number of directors, not less than two shall be persons having special knowledge or practical experience in respect of agriculture and rural economy, cooperation or smallscale industry; and

(b) shall not

(1) have substantial interest in, or be connected with, whether as employee, manager or managing agent,

(i) any company, not being a company registered under section 25 of the Companies Act, 1956 (1 of 1956.), or

(ii) any firm, which carries on any trade, commerce or industry and which, in either case, is not a smallscale industrial concern, or

(2) be proprietors of any trading, commercial or industrial concern, not being a smallscale industrial concern.

(2A) Notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law for the time being in force,

(i) no director of a banking company, other than its chairman or wholetime director, by whatever name called, shall hold office continuously for a period exceeding eight years;

(ii) a chairman or other wholetime director of a banking company who has been removed from office as such chairman, or wholetime director, as the case may be, under the provisions of this Act shall also cease to be a director of the banking company and shall also not be eligible to be appointed as a director of such banking company, whether by election or cooption or otherwise, for a period of four years from the date of his ceasing to be the chairman or wholetime director, as the case may be.

(3) If, in respect of any banking company, the requirements, as laid down in subsection (2), are not fulfilled at any time, the Board of directors of such banking company shall reconstitute such Board so as to ensure that the said requirements are fulfilled.

(4) If, for the purpose of reconstituting the Board under subsection (3), it is necessary to retire any director or directors, the Board may, by lots drawn in such manner as may be prescribed, decide which director or directors shall cease to hold office and such decision shall be binding on every director of the Board.

(5) Where the Reserve Bank is of opinion that the composition of the Board of directors of a banking company is such that it does not fulfil the requirements of subsection (2), it may, after giving to such banking company a reasonable opportunity of being heard, by an order in writing, direct the banking company to so reconstitute its Board of directors as to ensure that the said requirements are fulfilled and, if within two months from the date of receipt of that order, the banking company does not comply with the directions made by the Reserve Bank, that Bank may, after determining, by lots drawn in such manner as may be prescribed, the person who ought to be removed from the membership of the Board of directors, remove such person from the office of the director of such banking company and with a view to complying with the provisions of subsection (2), appoint a suitable person as a member of the Board of directors in the place of the person so removed where upon the person so appointed shall be deemed to have been duly elected by the banking company as its director.

(6) Every appointment, removal or reconstitution duly made, and every election duly held, under this section shall be final and shall not be called into question in any court.

(7) Every director elected or, as the case may be, appointed under this section shall hold office until the date up to which his predecessor would have held office, if the election had not been held, or, as the case may be, the appointment had not been made.

(8) No act or proceeding of the Board of directors of a banking company shall be invalid by reason only of any defect in the composition thereof or on the ground that it is subsequently discovered that any of its members did not fulfil the requirements of this section.

10B. Banking company to be managed by whole time chairman.

(1) Notwithstanding anything contained in any law for the time being in force or in any contract to the contrary, every banking company in existence on the commencement of the Banking Regulation (Amendment) Act, 1994 (20 of 1994), or which comes into existence thereafter shall have one of its directors, who may be appointed on a whole-time or a part-time basis as chairman of its Board of directors, and where he is appointed on a whole-time basis, as chairman of its Board of directors, he shall be entrusted with the management of the whole of the affairs of the banking company:

Provided that the chairman shall exercise his powers subject to the superintendence, control and direction of the Board of directors.

(1A) Where a chairman is appointed on a parttime basis,

(i) such appointment shall be with the previous approval of the Reserve Bank and be subject to such conditions as the Reserve Bank may specify while giving such approval;

(ii) the management of the whole of the affairs of such banking company shall be entrusted to a managing director who shall exercise his powers subject to the superintendence, control and direction of the Board of directors.

(2) Every chairman of the Board of directors who is appointed on a wholetime basis and every managing director of a banking company shall be in the whole time employment of such company and shall hold office for such period, not exceeding five years, as the Board of directors may fix, but shall, subject to the provisions of this section, be eligible for reelection or reappointment:

Provided that nothing in this subsection shall be construed as prohibiting a chairman from being a director of a subsidiary of the banking company or a director of a company registered under section 25 of the Companies Act, 1956 (1 of 1956).

(3) Every person holding office on the commencement of section 3 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), as managing director of a banking company shall

(a) if there is a chairman of its Board of directors, vacate office on such commencement, or

(b) if there is no chairman of its Board of directors, vacate office on the date on which the chairman of its Board of directors is elected or appointed in accordance with the provisions of this section.

(4) Every chairman who is appointed on a wholetime basis and every managing director of a banking company appointed under subsection (1A) shall be a person who has special knowledge and practical experience of

(a) the working of a banking company, or of the State Bank of India or any subsidiary bank or a financial institution, or

(b) financial, economic or business administration:

Provided that a person shall be disqualified for being a chairman who is appointed on a wholetime basis or a managing director if he

(a) is a director of any company other than a company referred to in the proviso to subsection (2), or

(b) is a partner of any firm which carries on any trade, business or industry, or

(c) has substantial interest in any other company or firm, or

(d) is a director, manager, managing agent, partner or proprietor of any trading, commercial or industrial concern, or

(e) is engaged in any other business or vocation.

(5) A chairman of the Board of directors appointed on a wholetime basis or a managing director of a banking company may, by writing,under his hand addressed to the company, resign his office,

(5A) A chairman of the Board of directors appoint on a wholetime basis or amanaging director whose term of office has come to an end, either by reason of his resignation or by reason of expiry of the period of his office, shall, subject to the approval of the Reserve Bank, continue in office until his successor assumes office.

(6) Without prejudice to the provisions of section 36AA, where the Reserve Bank is of opinion that any person who is, or has been elected to be, the chairman of the Board of directors who is appointed on a wholetime basis or the managing director of a banking company is not a fit and proper person to hold such office, it may, after giving to such person and to the banking company a reasonable opportunity of being heard, by order in writing, require the banking company to elect or appoint any other person as the chairman of the Board of directors who is appointed on a wholetime basis or the managing director and if, within a period of two months from the date of receipt of such order, the banking company fails to elect or appoint a suitable person as the chairman of the Board of directors who is appointed on a wholetime basis or the managing director the Reserve Bank may, by order, remove the firstmentioned person from the office of the chairman of the Board of directors who is appointed on a wholetime basis or the managing director of the banking company and appoint a suitable person in his place where upon the person so appointed shall be deemed to have been duly elected or appointed, as the case may be, as the chairman of the Board of directors who is appointed on a wholetime basis or the managing director of such banking company and any persons elected or appointed as chairman on a wholetime basis or the managing director under this subsection shall hold office for the residue of the period of office of the person in whose place he has been so elected or appointed.

(7) The banking company and any person against whom an order of removal is made under subsection (6) 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 thereon, and subject thereto, the order made by the Reserve Bank under subsection (6), shall be final and shall not be called into question in any court.

(8) Notwithstanding anything contained in this section, the Reserve Bank may, if in its opinion it is necessary in the public interest so to do, permit the chairman of the Board of directors who is appointed on a wholetime basis or the managing director to undertake such parttime honorary work as is not likely to interfere with his duties as such chairman or managing director.

(9) Notwithstanding anything contained in this section, where a person appointed on a wholetime basis, as chairman of the Board of directors or managing director 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 may, with the approval of the Reserve Bank, make suitable arrangements for carrying out the duties of chairman or managing director for a total period not exceeding four months.

10BB. Power of Reserve Bank to appoint chairman of the Board of directors appointed on a wholetime basis or a managing director of a banking company.

(1) Where the office of the chairman of the Board of directors appointed on a wholetime basis or a managing director of a banking company is vacant, the Reserve Bank may, if it is of opinion that the continuation of such vacancy is likely to adversely affect the interests of the banking company, appoint a person, eligible under subsection (4) of section 10B to be so appointed, to be the chairman of the Board of directors appointed on a wholetime basis or a managing director of the banking company and where the person so appointed is not a director of such banking company, he shall, so long as he holds the office of the chairman of the Board of directors appointed on a wholetime basis or a managing director, be deemed to be a director of the banking company.

(2) The chairman of the Board of directors appointed on a wholetime basis or a managing director so appointed by the Reserve Bank shall be in the wholetime employment of the banking company and shall hold office for such period not exceeding three years, as the Reserve Bank may specify, but shall, subject to other provisions of this Act, be eligible for reappointment.

(3) The chairman of the Board of directors appointed on a wholetime basis or a managing director so appointed by the Reserve Bank shall draw from the banking company such pay and allowances as the Reserve Bank may determine and may be removed from office only by the Reserve Bank.

(4) Save as otherwise provided in this section, the provisions of section 10B shall, as far as may be, apply to the chairman of the Board of directors appointed on a wholetime basis or a managing director appointed by the Reserve Bank under subsection (1) as they apply to a chairman of the Board of directors appointed on a wholetime basis or a managing director appointed by the banking company.

10C. Chairman and certain directors not to be required to hold qualification shares. A chairman of the Board of directors who is appointed on a wholetime basis or a managing director of a banking company (by whomsoever appointed) and a director of a banking company (appointed by the Reserve Bank under section 10A) shall not be required to hold qualification shares in the banking company.

10D. Provisions of sections 10A, 10B and 10BB to override all other laws, contracts, etc. Any appointment or removal of a director, chairman of the Board of directors who is appointed on a wholetime basis or managing director in pursuance of section 10A or section 10B or section10BB shall have effect and any such person shall not be entitled to claim any compensation for the loss or termination of office, notwithstanding anything contained in any law or in any contract, memorandum or articles of association.

 


1. Subs. by Act 33 of 1959, s. 6, for subsection (3) (w.e.f. 1101959).

2. Omitted by Act 55 of 1963, s. 8 (w.e.f. 121964)

Related Posts