MANAGEMENT OF THE NATIONAL BANKCentral

Section 9 of The National Bank for Agriculture and Rural Development Act, 1981

(1)No person shall be a director who--
1. (a)is of unsound mind and stands so declared by a competent court; or
2. (b)is or has been convicted of any offence which, in the opinion of the Central Government, involves moral turpitude; or
3. (c)is, or at any time has been, adjudicated insolvent or has suspended payment of his debts or has compounded with his creditors.
(2)The appointment as director of any person who is a Member of Parliament or the Legislature of any State shall, unless within two months of the date of his appointment he ceases to be such member, be void on the expiry of the said period of two months and if any director is elected or nominated as a Member of Parliament or of any State Legislature he shall cease to be a director as from the date of such election or nomination, as the case may be.

Summary

A person cannot be a director if a competent court declares them to be of unsound mind.
A person is disqualified if they have been convicted of a crime that the Central Government believes involves moral turpitude.
A person cannot be a director if they are declared insolvent, have stopped paying their debts, or have made a compromise agreement with their creditors.
If an existing Member of Parliament or a State Legislature is appointed as a director, they have two months to resign from their political seat, or their director appointment becomes void.
If a current director gets elected or nominated to Parliament or a State Legislature, they instantly stop being a director on the day of their election or nomination.

Practical examples

1On May 1, 2025, Vikram Singh, a sitting Member of Parliament, was appointed as a director. By July 1, 2025 (two months later), he had not resigned from Parliament. Consequently, his appointment as a director automatically became void on that day.

2Kavita Menon was serving as a director of the National Bank. In 2024, her personal business failed, and she was officially adjudicated insolvent by a court. Because of this insolvency, she was legally disqualified from being a director.

FAQ

1. Can a person who went bankrupt become a director?

No. Anyone who is adjudicated insolvent or has suspended payment of their debts is disqualified from being a director.

2. Who decides if a criminal conviction is bad enough to disqualify a director?

The Central Government decides if the offense involves "moral turpitude" (which means behavior that is deeply unethical or immoral).

3. Can a local politician be a director?

Yes, but only if they are not a Member of Parliament or a member of a State Legislature. If they hold one of those two high offices, they cannot simultaneously hold a director seat for more than a brief two-month transition window.

Test yourself

Q1.Under Section 9 of The National Bank for Agriculture and Rural Development Act, 1981, which of the following financial situations disqualifies a person from being a director?

Q2.Under Section 9 of The National Bank for Agriculture and Rural Development Act, 1981, who has the authority to form an opinion on whether a director's criminal conviction involves moral turpitude?

Q3.Under Section 9 of The National Bank for Agriculture and Rural Development Act, 1981, what happens if an existing director is elected as a Member of Parliament?

Q4.Under Section 9 of The National Bank for Agriculture and Rural Development Act, 1981, how much time does a newly appointed director have to resign from a State Legislature before their director appointment becomes void?

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