Section 10A of BRA : Section 10A: Board Of Directors To Include Persons With Professional Or Other Experience

Explanation using Example

Imagine a medium-sized bank called "CityBank" which has been operating for several years. The bank is reviewing its board of directors to ensure compliance with Section 10A of the Banking Regulation Act, 1949. According to this law, CityBank needs to ensure that:

• At least 51% of its board members have special knowledge or practical experience in areas such as banking, law, finance, agriculture, or small-scale industry.
• Among these knowledgeable members, at least two should have expertise specifically in agriculture, rural economy, co-operation, or small-scale industry.
• None of the directors should have substantial interest in large companies or be proprietors of large trading, commercial, or industrial concerns.

CityBank discovers that only 40% of its current board has the required special knowledge or experience. To comply with the law, CityBank must reconstitute its board. They decide to retire two directors who lack the specified expertise and recruit three new directors with backgrounds in finance, law, and rural agriculture, thus fulfilling the legal requirement.

Furthermore, one of the directors has been serving for nine years, exceeding the eight-year limit. The bank does not reappoint this director, ensuring compliance with the tenure regulations.

CityBank takes these actions promptly to avoid any intervention from the Reserve Bank of India, which has the authority to enforce these rules and reconstitute the board if the bank fails to comply.