Blitz Bureau
NEW DELHI: Public sector banks (PSBs) across India continue to suffer from an alarming shortage of directors and senior executives. Key positions, including those of Chairmen, Managing Directors and Chief Executive Officers, remain unfilled for years at a stretch. Right to Information replies and parliamentary disclosures show that nearly half of sanctioned board seats in many PSBs are vacant, leaving institutions handicapped in governance and strategic oversight. The Central Bank of India, for example, has been functioning without a Chairman, MD or CEO and still carries five vacant board seats. Bank of Baroda, which should ideally have sixteen directors, currently manages with only ten. Punjab & Sind Bank operates with just three members on its board against a sanctioned strength of ten. The result is a hollowing out of leadership at the very top of the banking system.
Empty chairs in boardrooms translate into weaker oversight and delayed decisions.
Anatomy of the Delay
The reasons behind these delays are embedded in the very structure of the appointment process. Selections must first be screened by the Financial Services Institutions Bureau, then cleared by the Department of Financial Services, followed by approvals from the Appointments Committee of the Cabinet, with vigilance and security clearances thrown in for good measure. At every stage files tend to languish for weeks or months without accountability, leading to prolonged vacancies. Matters worsened in 2021 when the legal competence of the Banks Board Bureau was challenged, forcing the government to replace it with the FSIB. This institutional reshuffle created a year-long freeze in leadership appointments for banks and insurers, further disrupting an already cumbersome process.
A multi-gate system with no deadlines is a recipe for perpetual vacancies.
Independent and Workmen Directors: The Forgotten Seats
The crisis is not confined to the posts of MDs and CEOs. Independent directors and representatives of workmen and officers have also been missing from bank boards for years. These positions, critical for balancing governance, often remain neglected. Some seats on powerful audit committees, especially those meant for chartered accountants, have been vacant for a decade or more. According to Devidas Tuljapurkar of the All India Bank Employees’ Association, almost half of the board positions in PSBs have been unoccupied for ten years. Such absences weaken the very committees designed to ensure checks and balances in the banking system.
Representation has been promised but not delivered, leaving committees toothless.
Regulatory Red Flags
Regulatory and oversight institutions have repeatedly expressed concern. The Comptroller and Auditor General has flagged the absence of independent and women directors in listed PSUs, including banks, as a violation of corporate governance standards. The Securities and Exchange Board of India requires that any board vacancy be filled within three months. Yet PSBs continue to flout this mandate with little consequence. Former SEBI Chairman Ajay Tyagi described the situation bluntly, calling it a shame that most PSBs and PSUs do not meet even the minimum standards of governance expected under law. The Reserve Bank of India has also stressed that under-staffed boards weaken risk management and strategic oversight, posing a direct threat to financial stability.
Regulators warn, but compliance remains optional for PSBs.
Parliamentary Committees Sound the Alarm
Parliamentary Standing Committees have on multiple occasions called for the professionalisation of bank boards and for depoliticisation of the appointment process. Reports have emphasised that delays in filling vacancies damage accountability and weaken financial discipline. The RBI’s P.J. Nayak Committee went even further in 2014, recommending that the government reduce its ownership role, transfer its holdings to a bank investment company, and end political interference in appointments. Despite these repeated recommendations, bureaucratic bottlenecks and institutional inertia have ensured that the system continues unchanged.
Parliament has spoken, experts have advised—but action remains missing.
Consequences for the Banking Sector
The consequences of this governance gap are serious. Audit committees often operate without quorum, risk management functions are undermined, and key strategic decisions are delayed. Investors and shareholders are left without representation, while lending discipline is weakened. At a systemic level, the credibility of public-sector banks—institutions that hold more than sixty per cent of India’s financial assets—is eroded. This credibility deficit damages not only the banks themselves but also the economy that depends on them.
A weak board is not just a governance lapse—it’s a systemic risk.
The Way Forward
Experts believe that reforms must be urgent and time-bound. The appointment process should be given clear deadlines at every stage so that ministries cannot sit indefinitely on files. Candidate panels for independent and workmen directors should be pre-vetted and kept ready, eliminating long gaps. Digital single-window clearance systems for vigilance and integrity checks should be introduced to replace the current patchwork of approvals. Above all, the Financial Services Institutions Bureau’s role must be stabilised in law to avoid further legal disruptions. Allowing outgoing directors to continue briefly until replacements are in place can also prevent governance breakdowns.
Blitz Views
The problem of vacant boardrooms in India’s public-sector banks is not incidental. It is a structural failure born of bureaucratic inertia, legal missteps and a lack of accountability. Repeated warnings from regulators, auditors, parliamentary committees and expert panels have been ignored. Unless the government enforces strict accountability and time-bound reforms, India’s largest banks will continue to operate with weakened governance and damaged credibility.
India’s banks cannot deliver strong governance to the economy if they lack it within their own boardrooms.
