RBI bars appointment of new directors on BoR board
RBI has barred Bank of Rajasthan (BoR) from appointing any new directors on board without its consent.
By Sangita Mehta, TNN |
MUMBAI: The Reserve Bank of India (RBI) has barred Bank of Rajasthan (BoR) from appointing any new directors on the bank's board without its consent. According to BoR sources, RBI’s move is aimed at preventing the Tayals — the bank’s principal shareholders — from joining the board.
Pravin Kumar Tayal, a key shareholder, was on the bank’s board for eight years in a row. According to the Banking Regulation Act, no director of a bank, other than the chairman or a whole-time director, can hold office continuously for eight years. According to the rule, there has to be a cooling period of six-to-12 months before the same person can rejoin the board.
Sources said RBI is apprehensive of Mr Tayal coming on the bank’s board again as a director. Since 2003, RBI has repeatedly rejected his application to return to the bank as its chairman. After these attempts, RBI was forced to issue a directive that any director-level appointment in the bank would have to be done with the regulator’s consent.
This is contrary to what is followed at other private banks, where the board does not have to seek RBI’s approval for appointing a director.
Banking sources added RBI’s resistance to Mr Tayal’s appointment as chairman again stems from the fact that he holds a higher-than-stipulated equity stake in the bank. RBI has repeatedly told the key shareholder to lower his stake to 10%. Besides, there were also reports about alleged violations of corporate governance norms and Mr Tayal’s excessive interference in the bank’s working.
Mr Tayal was the chairman of BoR from 1998 to 2003. Subsequently, he had to step down from the position and settle for being a director as the regulator did not approve of his candidature for the chairman’s post again. He was director on the bank’s board until the last quarter of 2006.
Sources said, RBI issued the directive just before Mr Tayal’s cooling period expired. Meanwhile, the Jaipur-based private bank, which does not have a chairman since 2003, recently invited applications for the managing director’s (MD) post. The existing MD, BM Sharma’s, term expires in November.
The sources added the bank had forwarded the names of three bankers to RBI. These include PL Ahuja, general manager of Oriental Bank ; US Kohli, former ED of Dena Bank, and SML Goel, general manager of the erstwhile LKB, which recently merged with Centurion Bank.
Pravin Kumar Tayal, a key shareholder, was on the bank’s board for eight years in a row. According to the Banking Regulation Act, no director of a bank, other than the chairman or a whole-time director, can hold office continuously for eight years. According to the rule, there has to be a cooling period of six-to-12 months before the same person can rejoin the board.
Sources said RBI is apprehensive of Mr Tayal coming on the bank’s board again as a director. Since 2003, RBI has repeatedly rejected his application to return to the bank as its chairman. After these attempts, RBI was forced to issue a directive that any director-level appointment in the bank would have to be done with the regulator’s consent.
This is contrary to what is followed at other private banks, where the board does not have to seek RBI’s approval for appointing a director.
Banking sources added RBI’s resistance to Mr Tayal’s appointment as chairman again stems from the fact that he holds a higher-than-stipulated equity stake in the bank. RBI has repeatedly told the key shareholder to lower his stake to 10%. Besides, there were also reports about alleged violations of corporate governance norms and Mr Tayal’s excessive interference in the bank’s working.
Mr Tayal was the chairman of BoR from 1998 to 2003. Subsequently, he had to step down from the position and settle for being a director as the regulator did not approve of his candidature for the chairman’s post again. He was director on the bank’s board until the last quarter of 2006.
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Sources said, RBI issued the directive just before Mr Tayal’s cooling period expired. Meanwhile, the Jaipur-based private bank, which does not have a chairman since 2003, recently invited applications for the managing director’s (MD) post. The existing MD, BM Sharma’s, term expires in November.
The sources added the bank had forwarded the names of three bankers to RBI. These include PL Ahuja, general manager of Oriental Bank ; US Kohli, former ED of Dena Bank, and SML Goel, general manager of the erstwhile LKB, which recently merged with Centurion Bank.
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