5. Management.—(1) The general superintendence, direction and management of the affairs and
business of the National Bank shall vest in a Board of Directors, which shall exercise all powers and do
all acts and things which may be exercised or done by the National Bank.
(2) Subject to the provisions of this Act, the Board in discharging its functions, shall act on business
principles with due regard to public interest.
(3) Subject to the provisions of sub-section (1) and save as otherwise provided in the regulations
made under this Act, the Managing Director shall also have powers of general superintendence, direction
and management of the affairs and business of the National Bank and may also exercise all powers and do
all acts and things which may be exercised or done by the National Bank:
2
[Provided that during the period of any casual vacancy of the nature referred to in section 11 in the
office of the Managing Director, the Chairman may also exercise the powers and discharge the functions
of the Managing Director until the person appointed by the Central Government under section 11 to act as
Managing Director enters upon his office.]
(4) Any whole-time director appointed under sub-section (3) of section 6 shall assist the Managing
Director in the discharge of his functions under sub-section (3) and perform such duties as the Board may
entrust or delegate to him.
(5) In the discharge of his powers and functions under sub-section (3), the Managing Director shall
follow such directions as the Chairman may give.
(6) In the discharge of its functions under this Act, the National Bank shall be guided by such
directions in matters of policy involving public interest as the Central Government, in consultation with
the Reserve Bank, or the Reserve Bank, may give in writing.
6. Board of Directors.—3
[(1)The Board of Directors of the National Bank shall consist of the
following, namely:—
(a) a Chairman;
(b) three directors from amongst experts in rural economics, rural development, village and
cottage industries, 4
[micro-enterprises, small enterprises and medium enterprises] or persons having
experience in the working of co-operative banks, regional rural banks or commercial banks or any
other matter the special knowledge or professional experience in which is considered by the Central
1. Subs by Act 7 of 2018, s. 5, for sub-section (2) (w.e.f. 15-3-2018).
2. Ins. by Act 66 of 1988, s. 43 (w.e.f. 30-12-1988).
3. Subs. by Act 55 of 2000, s. 5, for sub-sections (1) and (2) (w.e.f. 1-2-2001).
4. Subs. by Act 7 of 2018, s. 6, for “small-scale industries” (w.e.f. 15-3-2018).
8
Government as useful to the National Bank;
(c) three directors from out of the directors of the Reserve Bank;
(d) three directors from amongst the officials of the Central Government;
(e) four directors from amongst the officials of the State Governments;
(f) such number of directors elected in the prescribed manner, by shareholders other than the
Reserve Bank, the Central Government and other institutions owned or controlled by the Central
Government whose names are entered on the register of shareholders of the National Bank ninety
days before the date of the meeting in which such election takes place on the following basis,
namely:—
(i) where the total amount of equity……………………………….
share capital issued to such shareholders is ten per cent. or less of the
total issued equity capital
two directors;
(ii) where the total amount of equity................................................
share capital issued to such shareholders is more than ten per cent.
but less than twenty-five per cent. of the total issued equity capital
three directors;
and
(iii) where the total equity share capital…………………………...
issued to such shareholders is twenty-five per cent. or more of the
total issued equity capital:
four directors:
Provided that until the assumption of charge by the elected directors under this clause, the
Central Government may at any time nominate such number of directors not exceeding four from
amongst persons having special knowledge of, and professional experience in, agricultural
science, technology, economics, banking, co-operatives, law, rural finance, investment,
accountancy, marketing or any other matter, the special knowledge of, and professional
experience in, which would, in the opinion of the Central Government, be useful to the National
Bank for carrying out its functions; and
(g) a Managing Director.
(2) The Chairman and other directors, excluding the directors referred to in clause (f), shall be
appointed by the Central Government in consultation with the Reserve Bank:
Provided that no such consultation shall be necessary in the case of directors appointed under clause
(d) of sub-section (1).
(3) Where the Central Government is satisfied, in consultation with the Reserve Bank, 1*** that it is
necessary so to do, it may appoint one or more whole-time directors with such designations as may be
deemed appropriate by that Government and any whole-time director so appointed shall also be a member
of the Board:
2* * * * *
7. Term of office of Chairman and other directors, retirement and payment of fees.—(1) The
Chairman shall hold office for such term not exceeding five years and shall receive such salary and
allowances as the Central Government may, at the time of appointment, specify 3
[and shall be eligible for
reappointment]:
4* * * * *
1. The words “and the Board” omitted by Act 81 of 1985, s. 17(w.e.f. 1-5-1986).
2. The proviso omitted by s. 17, ibid. (w.e.f. 1-5-1986).
3. Ins. by Act 55 of 2000, s. 6 (w.e.f. 1-2-2001).
4. The proviso omitted by Act 81 of 1985, s.18 (w.e.f. 1-5-1986).
9
1
[(1A) Notwithstanding anything contained in sub-section (1), the Central Government shall have the
right to terminate the term of office of the Chairman at any time before the expiry of the term specified
under that sub-section by giving him a notice of not less than three months in writing or three months’
salary and allowances in lieu of such notice.]
2
[(1B) In the case of a vacancy in the office of the Chairman, the Managing Director shall perform the
functions and duties of the Chairman during such vacancy.]
3
[(2) Subject to the provisions contained in sub-section (5), a director appointed under clause (b) or
clause (c) of sub-section (1) of section 6, shall hold office for such term, not exceeding three years, as the
Central Government may specify in this behalf 4***, and shall be eligible for reappointment:
Provided that no such director shall hold office continuously for a period exceeding six years.]
(3) The Central Government may, in consultation with the Reserve Bank, remove the Chairman 5***
at any time before the expiry of his term of office after giving him a reasonable opportunity of showing
cause against the proposed removal.
6
[(4) The Chairman and any other director, who is not an officer of the Central Government or a State
State Government or an officer of the Reserve Bank or any body or corporation established by or under
any Central Act or any State Act and owned or controlled by such Government, shall be paid such fees
and allowances as may be prescribed for attending the meetings of the Board or of any of its committees
and for attending to any other work of the National Bank.]
7
[(5) The directors appointed under clauses (b) to (f) of sub-section (1) of section 6 shall hold office
during the pleasure of the Central Government.]
8. Term of office of Managing Director and whole-time directors, conditions of service, etc.—(1)
The Managing Director and any whole-time director appointed under sub-section (3) of section 6
shall,—
(a) hold office for such term not exceeding five years as the Central Government may, at the time
of appointment, specify 8
[and shall be eligible for reappointment];
(b) receive such salary and allowances and be governed by such terms and conditions of service
as the Board may, with the previous approval of the Central Government and in consultation with the
Reserve Bank, determine:
Provided that the Managing Director and any such whole-time director appointed to the first
Board shall receive such salary and allowances and be governed by such terms and conditions of
service as the Central Government may, in consultation with the Reserve Bank, determine.
(2) The Central Government may, in consultation with the Reserve Bank, remove the Managing
Director or any whole-time director appointed under sub-section (3) of section 6 at any time before the
expiry of his term of office, after giving him a reasonable opportunity of showing cause against the
proposed removal.
(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), the Central Government
shall have the right to terminate the term of office of the Managing Director or of any whole-time director
appointed under sub-section (3) of section 6 at any time before the expiry of the term fixed under subsection (1) by giving him notice of not less than three months in writing or three months’ salary and
allowances in lieu of such notice:
1. Ins. by Act 81 of 1985, s. 18 (1-5-1986).
2. Ins. by Act 55 of 2000, s. 6 (w.e.f. 1-2-2001).
3. Subs. by Act 66 of 1988, s. 45, for sub-section (2) (w.e.f. 30-12-1988).
4. The words “and thereafter until his successor enters upon his office” omitted by Act 55 of 2000, s. 6 (w.e.f. 1-2-2001).
5. The words, brackets and figure “or any other director referred to in sub-section (2)” omitted by Act 66 of 1988, s. 45
(w.e.f. 30-12-1988).
6. Subs. by Act 55 of 2000, s. 6, for sub-section (4) (w.e.f. 1-2-2001).
7. Ins. by Act 66 of 1988, s. 45 (w.e.f. 30-12-1988).
8. Ins. by Act 55 of 2000, s. 7 (w.e.f. 1-2-2001).
10
Provided that the Central Government shall, before terminating the term of office of the Managing
Director or any whole-time director appointed under sub-section (3) of section 6, consult the Reserve
Bank.
9. Disqualifications.—(1) No person shall be a director who—
(a) is of unsound mind and stands so declared by a competent court; or
(b) is or has been convicted of any offence which, in the opinion of the Central Government,
involves moral turpitude; or
(c) is, or at any time has been, adjudicated insolvent or has suspended payment of his debts or has
compounded with his creditors.
(2) The appointment as director of any person who is a Member of Parliament or the Legislature of
any State shall, unless within two months of the date of his appointment he ceases to be such member, be
void on the expiry of the said period of two months and if any director is elected or nominated as a
Member of Parliament or of any State Legislature he shall cease to be a director as from the date of such
election or nomination, as the case may be.
10. Vacation and resignation of office by directors.—(1) If a director—
(a) becomes subject to any of the disqualifications mentioned in section 9; or
(b) is absent without leave of the Board for more than three consecutive meetings thereof,
his seat shall thereupon become vacant.
(2) Any director may resign his office by giving notice thereof in writing to the Central Government,
and on his resignation being accepted by the Central Government or if his resignation is not sooner
accepted, on the expiry of three months from the receipt thereof by the Central Government, he shall be
deemed to have vacated his office.
11. Casual vacancy in the office of Managing Director.—If the Managing Director is by infirmity
or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise, in
circumstances not involving the vacation of his appointment, the Central Government may, after
consultation with the Reserve Bank and the Board, appoint another person to act in his place as Managing
Director during his absence.
12. Meetings of Board.—(1) The Board shall meet at such times and places and shall observe such
rules of procedure in regard to the transaction of business at its meetings as may be prescribed.
(2) The Chairman of the Board, or, if for any reason he is unable to attend any meeting, 1
[the
Managing Director and in the absence of both, the Chairman and the Managing Director] any other
director nominated by the Chairman in this behalf, and in the absence of such nomination, any other
director elected by the directors present at the meeting, shall preside at the meeting of the Board.
(3) All questions which come up before any meeting of the Board shall be decided by a majority of
votes of the directors present and voting, and in the event of an equality of votes, the Chairman, or, in his
absence, the person presiding, shall have a second or casting vote.
13. Committees of National Bank.—(1) The Board may constitute an Executive Committee
consisting of such number of directors as may be prescribed.
(2) The Executive Committee shall discharge such functions as may be prescribed or may be
delegated to it by the Board.
(3) The Board may constitute such other committees, whether consisting wholly of directors or
wholly of other persons or partly of directors and partly of other persons as it thinks fit and for such
purposes as it may decide and every committee so constituted shall discharge such functions as may be
delegated to it by the Board.
1. Ins. by Act 55 of 2000, s. 8 (w.e.f. 1-2-2001).
11
(4) The Executive Committee shall meet at such times and places and shall observe such rules of
procedure in regard to the transaction of business at its meetings, as may be prescribed.
(5) The times and places at which any committee constituted under sub-section (3) shall meet, the
rules of procedure which such committee shall observe in regard to the transaction of business at its
meetings, and the fees and allowances which may be paid to the members of such committee for attending
the meetings of the committee and for attending to any other work of the National Bank shall be such as
may be specified by that Bank.
14. Advisory Council.—(1) 1
[The Board may] constitute an Advisory Council consisting of such
number of directors and such other persons who, in the opinion of the Board, have special knowledge of
agriculture, agricultural credit, co-operation and rural economics, 2
[micro-enterprises, small enterprises
and medium enterprises,] village and cottage industries and handicrafts and other rural crafts or have
special knowledge and appreciation of the country's overall developmental policies and in particular
overall monetary and credit policies, which is considered by the Board as useful to the NationalBank.
(2) The Advisory Council shall advise the National Bank in such matters as may be referred to the
Advisory Council by the National Bank and may discharge such other functions as may be entrusted or
delegated to the Advisory Council by the National Bank.
(3) A member of the Advisory Council shall hold office for such term not exceeding five years as the
National Bank may fix, and receive such fees and allowances as may be prescribed for attending the
meetings of the Advisory Council and for attending to any other work of the National Bank.
(4) The Advisory Council shall meet at such times and places and shall observe such rules of
procedure in regard to transaction of business at its meetings as may be prescribed.
15. Member of Board or Committee thereof not to participate in meetings in certain cases.—A
director of the Board or a member of a Committee, who has any direct or indirect pecuniary interest in
any matter coming up for consideration at a meeting of the Board or a Committee thereof, shall, as soon
as possible after relevant circumstances have come to his knowledge, disclose the nature of his interest at
such meeting, and the disclosure shall be recorded in the minutes of the Board, or the Committee, as the
case may be, and the director or member shall not take any part in any deliberation or decision of the
Board or the Committee with respect to that matter.