In a landmark reform for India’s banking sector, the government has, for the first time, opened senior leadership positions in public sector banks to professionals from the private sector — including the prestigious post of managing director (MD) at State Bank of India (SBI). The move marks a historic shift in how top executives such as MDs, chief executive officers (CEOs) and whole-time directors (WTDs) are appointed across public financial institutions, introducing competition, transparency, and merit-based selection at the highest levels of the banking system. Meanwhile, the United Forum of Bank Unions (UFBU) has strongly opposed the government’s move, calling it 'an attack on the public character' of national financial institutions like SBI, nationalised banks, and Life Insurance Corporation of India (LIC).
According to official communications reviewed by
NDTV Profit and
Business Standard, the appointments committee of the cabinet (ACC) has approved new consolidated guidelines for appointing WTDs, including chairpersons, CEOs, MDs and executive directors (EDs), in public sector banks and state-run insurance companies. The department of financial services (DFS) under the Union ministry of finance (MoF) has formally circulated these revised procedures to all public sector banks and state-owned insurers.
Under the updated framework, private sector candidates may now apply for one of the four MD positions at SBI, subject to stringent eligibility criteria. Applicants must have at least 21 years of professional experience, of which a minimum of 15 years must be in banking. In addition, candidates must have either served two years at the board level of a bank or three years at the highest level below the board. Those currently eligible under public sector norms will also be allowed to apply for the post open to private sector professionals.
A vacancy for a private sector candidate could arise as early as January 2026, when the tenure of SBI's MD, Ashwini Kumar Tewari, comes to an end. Given that the SBI chairman is traditionally chosen from among the four managing directors, the reform potentially opens the door for a private sector banker to one day lead India’s largest public sector bank.
In a major procedural change, the financial services institutions bureau (FSIB), which is responsible for selecting and recommending candidates for top financial appointments, has been authorised to engage independent human resource agencies to assess applicants from the private sector. The human resources (HR) agencies will conduct behavioural and competency evaluations, but will not be involved in the shortlisting process.
Significantly, the government has removed the traditional annual performance appraisal reports (APARs) from the evaluation process for chairperson, CEO, and MD-level positions, replacing them with modern performance-based assessment criteria. However, APAR scores will continue to carry up to 30 marks in selections for executive director roles. This marks a decisive move away from seniority-based evaluations toward merit and capability assessments.
The revised guidelines also introduce stricter eligibility conditions for both public and private sector applicants. Any officer who has faced two or more major penalties during their career will be ineligible to apply for senior roles assessed by the FSIB. Candidates must also disclose any penalties, including minor ones, imposed during the past ten years. For executive directors in non-life insurance firms, the new norms make transfers subject to approval from the ACC, replacing the earlier system of internal transfers managed by the DFS.
The eligibility framework for the SBI MD position stipulates a minimum age of 45 and a residual service period of at least two years, considering the retirement age of 60. For MDs and CEOs of other public sector banks, three years of residual tenure has been proposed, while for EDs, the minimum age has been fixed at 40. The retirement age for the SBI chairman remains 63.
Officials involved in the process told NDTV Profit that the reform is intended to strengthen professionalism, accountability and innovation in the public sector banking system. “This reform aims to bring transparency, diversity, and merit-based selection in leadership roles across India’s financial institutions,” a senior government official was quoted as saying.
FSIB will now have greater flexibility to use independent assessments and broader evaluation criteria. A top public sector bank official told Business Standard that the new consolidated guidelines will speed up the appointment process and help fill key vacancies that have remained open for months. “Right now, several senior positions are vacant. This streamlined and professional approach will ensure the selection of competent individuals who can enhance overall banking performance,” the official says.
The latest decision follows the government’s growing focus on institutional reforms in public sector banking. Just last month, MoF hosted a two-day ‘PSB Manthan’ event with top executives of public sector banks to chart the next phase of reforms aimed at strengthening governance, enhancing competitiveness and accelerating digital transformation. As part of this long-term vision, the government has set a target of elevating at least two to three Indian public sector banks into the ranks of the world’s top 20 by 2047.
The introduction of private sector competition at the top of India’s largest public sector bank signals a profound shift in the governance architecture of state-owned financial institutions.
UFBU, representing nine major officers’ and workmen’s unions across all banks, has issued a sharp protest against the government’s decision to open top public-sector bank and insurance company positions to private-sector professionals. The forum argued that the appointments committee of the cabinet’s revised guidelines, issued on 4 October 2025, amount to 'executive privatisation' of leadership in statutory institutions such as SBI and LIC, without any amendment to the governing Acts passed by Parliament.
UFBU contended that these changes undermine the public and constitutional ethos of nationalised institutions, replacing statutory merit systems and APAR-based evaluations with assessments by private HR agencies. It warned that allowing lateral entry from the private sector could demoralise career public-sector bankers, erode institutional memory, and threaten the public accountability that has guided India’s banking system since nationalisation.
The forum demanded that the new policy be immediately suspended and referred to the parliamentary standing committee on finance for a comprehensive review, asserting that “public-sector banking is a pillar of India’s economic sovereignty, not a field for corporate experimentation.”
