Parliamentary panel for raising PSB chiefs' retirement age to 70 from 60 yrs

As the ‘decade of retirement’ in public sector banks (PSBs) nears its end, a parliamentary committee has called for increasing the retirement age of their chief executive officers (CEOs) to 70 years from the current 60. This comes after PSBs raised with the panel the prospect of a leadership vacuum in the near future.

“With a view to utilising the expertise of senior bankers, the retirement age of CEOs of PSBs can be raised to 70 years as in the case of their private sector counterparts,” the Standing Committee on Finance said in its latest report.

In September 2014, the Reserve Bank of India (RBI) capped the retirement age for CEOs and whole-time directors of private sector banks at 70 years, as there was no age limit for these posts earlier. In PSBs, however, the retirement age for CEOs is capped at 60 years, even though the Union government can extend their tenures.

“Logically, if private banks have a higher retirement age, it can be argued that their public sector counterparts should also have the same. Besides, the government faces difficulty in filling the top slots. It will be difficult for the government to have a separate policy for PSBs and other public sector units,” said Karthik Srinivasan, senior vice-president at Icra.

Noting that the present decade till 2020 is a ‘decade of retirement’ for a large number of experienced executives in PSBs — a term coined by the RBI a few years ago — the committee said “the pinch of the loss of officers with professional depth and experience is already being felt”.

While recruitment at the junior level is taking place, there has been a slowdown in hiring recently, coupled with “the attrition of officer staff”, which has led to a shortage at the middle and senior levels.

The Indian Banks’ Association (IBA), in its submission to the committee, termed the issue of succession planning as a “very big challenge” for PSBs, fuelled by competition from other banks, non-banking financial institutions and fintech companies, and lower remuneration.

In PSBs, 95 per cent of the general manager (GM)-level employees, 75 per cent of the deputy GM-level employees, and 58 per cent of additional GM-level employees are going to retire by 2019-20, the committee noted.

“These senior employees carry with them exposure, experience and wealth of knowledge about clients and other business-related information. The retirement of these employees will create vacuum unless an institutionalised framework is put in place to pass on this wealth of knowledge to the next level,” the IBA said.