PSU Banks: Government Raises The Maximum Tenure Of CEOs And MDs To 10 Years

The Government of India has released a notification increasing the maximum tenure of Chief Executive Officers (CEOs) and Managing Directors (MDs) of public sector banks to 10 years.

The age of superannuation remains the same at 60 years.

According to the government, this decision would help in retaining talented young leaders, who rise to the top echelons of public sector banks between the age of 45-50.

It also said that this should be seen as part of the banking reforms process.

Earlier, the maximum tenure was of five years and the government would extend the tenure of a CEO or MD on a case-to-case basis, if it felt that it was necessary.

Last August, the government had extended the tenure of SS Mallikarjuna Rao, the MD and CEO of Punjab National Bank (PNB) and AS Rajeev, the MD and CEO of Bank of Maharashtra. While Rao’s tenure was extended till his superannuation, Rajeev’s tenure was extended by two years.

The move brings the tenure of heads of public sector banks on par with that of private sector banks.

While Chanda Kochhar was at the helm of ICICI bank for nine years before she stepped down due to allegations of favouring Videocon, Shyam Srinivasan has been leading Federal Bank for 12 years now.

According to an article in Moneycontrol, short tenure for public sector bank CEOs meant that there was a problem of both accountability and management continuity.

New CEOs who are under pressure to show fast business growth, typically tend to focus on loan volumes and not the quality of assets. This creates a bad assets problem for the incoming CEO.

Also, a new CEO would typically take a year to sort out issues from his predecessor’s tenure and then set things up in his own style, in the next couple of years.

By the time the new system would fully come into play, he would have to make way for the next CEO.