Small banks must have an ED in addition to MD and CEO

According to banking experts RBI must ensure that small to mid-sized private sector banks should have an Executive Director in addition to the Managing Director and Chief Executive Officer so that in case the latter retires or is ousted, the dayto-day affairs of the bank can be conducted without a hitch.

Recent developments at Lakshmi Vilas Bank (LVB) and Dhanlaxmi Bank underscore the importance of having one more Executive Director on the board who can handle the functions of the MD and CEO.

The day-to-day affairs of the aforementioned banks are now being handled by a three-member Committee of Directors (CoD), following the shareholders rejecting the resolution seeking the appointment of MD and CEO.

LVB shareholders had rejected the resolution seeking the appointment of S Sundar as Managing Director and CEO (interim), with 60.6 per cent of the votes polled being against it at the annual general meeting.

Similarly, DLB shareholders rejected the resolution seeking the appointment of Sunil Gurbaxani as MD and CEO, with 90.488 per cent of the votes polled being against it at the annual general meeting.

Banking expert V Viswanathan opined that having an Executive Director in addition to MD and CEO will ensure that a bank’s business and daily functions are carried hindrance.

He emphasised that since independent directors were not involved in operational matters earlier, they might take more time to convey their decisions if they have to exercise the powers of the MD and CEO.

S Ravi, Practising Chartered Accountant, observed that the RBI must give directions to all bank managements to have at least an Executive Director who is a ‘key managerial personnel’ so that he/ she can step in to lead the bank if the need arises. In this regard, Ravi emphasised that all public sector banks and large private sector banks have Executive Directors who can discharge the functions of the MD and CEO.