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The RBI vide its notification dated 26 April 202110 Notification no. RBI/2021-22/24 DOR.GOV.REC.8/29.67.001/2021-22 dated 26 April 2021- Corporate Governance in Banks - Appointment of Directors and Constitution of Committees of the Board, provides instructions with regard to the chair and meetings of the board, composition of certain committees of the board, age, tenure and remuneration of directors, and appointment of the whole-time directors (WTDs provided instructions on corporate governance for banks (corporate governance notification).

Paragraph 9 of the corporate governance notification deals with remuneration of Non-Executive Directors (NEDs) of banks. It states that in addition to sitting fees and expenses for attending meetings of the board and its committees, NEDs may be paid a compensation in the form of a fixed remuneration which should not exceed INR20 lakh per annum11 This limit would not be applicable to the chairman of the board of directors.

However, considering their significant role in the efficient functioning of banks, RBI, vide a notification dated 9 February 2024 (the notification) revised the aforementioned ceiling to INR30 lakh per annum.

Further, it has been clarified that:

  • The Board of a bank may fix a lower amount within the revised ceiling limit, depending upon the size of the bank, experience of the NED and other relevant factors
  • Banks should disclose the remuneration paid to directors on an annual basis at a minimum, in their annual financial statements.

Applicability and Effective Date: The above requirement would be applicable to all private sector banks, including Small Finance Banks (SFBs) and Payment Banks (PBs), as also the wholly owned subsidiaries of foreign banks. The notification came into force with effect from 9 February 2024.

To access the text of the notification, please click here

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