Two people familiar with the development said SBI has told the market regulator that the directive on splitting the roles doesn’t apply to it. Representatives from SBI and Sebi are expected to meet next week to discuss the issue.
“The bank is governed by a separate Act. The ‘chairman’ is an executive role, and the bank already has four MDs. So the rule doesn’t apply. But SBI is engaging with Sebi to understand the rationale,” said a bank official.
SBI is governed by the State Bank of India Act, 1955. The bank’s letter to the regulator two weeks ago points out that the provisions of Section 20 of the SBI Act do not envisage the post of a non-executive chairman.
ET reported Monday that almost half of the top 500 listed companies are yet to comply.The letter also says that Section 10B of the Banking Regulation Act, 1949, mandates that a bank will be managed by a wholetime chairman and argues that the rule will be applicable to SBI “to the extent” that it does not violate the statutes and directives issued by relevant authorities.
The SBI Act was passed by Parliament to set up the bank and transfer all assets and liabilities of the Imperial Bank of India to the former.
Sebi has asked all listed companies to appoint separate individuals to the posts of chairman and managing director by April 1, 2020. Also, the chairman, who will have a non-executive role, should not in any way be related to the managing director or the CEO. This rule, however, does not apply to companies with no identifiable promoter.
Sebi and SBI did not respond to emailed queries till press time Tuesday. “If such a move is expected to be implemented, the directions have to come from the Centre and the Reserve Bank of India, not from Sebi.
Splitting the roles of chairman and managing director will also require approval from Parliament. It’s not so easy,” said another official, who requested anonymity.