Section 9A of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
1 [9A. Power of Reserve Bank to appoint additional director.--(1) If the Reserve Bank is of the opinion that in the interest of banking policy or in the public interest or in the interests of the corresponding new bank or its depositors, it is necessary so to do, it may, from time to time, by order in writing appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the corresponding new bank.
- (2)Any person appointed as an additional director in pursuance of this section--
- (a)shall hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank may specify;
- (b)shall not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto; and
- (c)shall not be required to hold qualification shares in the corresponding new bank.
- (3)For the purpose of reckoning any proportion of the total number of directors of the corresponding new bank, any additional director appointed under this section shall not be taken into account.]
Summary
- The Reserve Bank has the power to appoint one or more additional directors to a bank's board if it serves banking policy, public interest, or the interests of the bank and its depositors.
- These additional directors serve for a maximum of three years at a time, but their terms can be extended by the Reserve Bank.
- Additional directors do not have to purchase or own any shares in the bank to qualify for their position.
- These directors are legally protected and will not be held personally liable for mistakes, as long as they act in good faith while doing their duties.
- When calculating any rules about the total number or proportion of directors on the board, these additional directors are ignored and not counted.
Practical examples
FAQ
1. Who is allowed to appoint an additional director under this section?
Only the Reserve Bank has the power to appoint additional directors under this specific provision.
2. Does an additional director serve a permanent term?
No, they hold office during the pleasure of the Reserve Bank for periods not exceeding three years at a time.
3. If a rule says a bank can only have a certain percentage of independent directors, do the additional directors ruin that math?
No, additional directors are not taken into account when reckoning any proportion of the total number of directors.
4. Can an additional director be punished if the bank loses money?
Not if they acted in good faith. They do not incur any obligation or liability for things done in good faith while doing their duties.
Test yourself
Q1.Under Section 9A of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, what is the maximum duration for a single term of an additional director?
Q2.Under Section 9A of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, which of the following financial requirements must an additional director meet to join the board?
Q3.Under Section 9A of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, how are additional directors treated when calculating the total proportion of directors on the board?
Q4.Under Section 9A of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, what legal protection is granted to an additional director?