Published: 01:08 AM, 14 September 2026
Central bank launches assessment system for appointing CEOs
The board of directors of a bank will prepare an assessment report carrying a total of 100 marks on the bank's capital adequacy and liquidity management, asset quality, profitability, corporate governance and internal control, as well as customer service, financial inclusion and market management. At the time of appointing or reappointing a managing director (MD), the bank's board of directors will set various targets in these areas. The employment contract will specify different indicators for achieving the bank's targets in these areas.
The targets will include the loan-to-advance ratio, non-performing loans (NPLs), monitoring of large and top borrowers, and targets for the recovery of non-performing and written-off loans.
In the case of reappointment, the bank's board of directors will have to submit to the central bank the scores achieved against the set previously. On Sunday, the central bank issued a policy titled "Key Performance Indicators (KPIs) Framework for Managing Director/Chief Executive Officer (CEO) of Banks" regarding the appointment of MDs or CEOs of commercial banks.
The board of directors of a commercial bank will submit a progress report on the employment contract to the central bank every six months.
According to the policy, 25 marks will be allocated to capital adequacy and liquidity management. Among the other areas, 25 marks will be allocated to asset quality, 10 to profitability, 25 to corporate governance and internal control, and 15 to customer service, financial inclusion and market management, making a total of 100 marks.
For the existing MDs and CEOs, an assessment report for the next six months will have to be submitted based on their performance during the preceding three months. For the upcoming assessment report, the period from October of the current year to March 2027 will be considered.
If an MD or CEO scores less than half of the marks allocated to any particular area, the score for that area will be considered zero.
At the time of appointing an MD, various targets in these areas will have to be set for a three-year period. The assessment report must be submitted to the central bank within 15 days after the end of each six-month period.
Banks may prepare the assessment reports at different times, if they wish. The prescribed assessment periods are January-June, April-September, July-December, or October-March.
A bank may choose any one of these periods.
The salary, allowances, incentives and other benefits of the MD will be determined based on the targets set and the results of the performance assessment. The policy also states that, in the case of reappointment, the central bank will review and verify this assessment report.
