Section 16 of the Act prohibits common directorships. No banking company incorporated in India may have in its Board of directors more than three directors who are directors of companies which among themselves are entitled to exercise voting rights in excess of what percentage of the total voting rights of all the shareholders of that banking company?

Section 16(1) prohibits a banking company incorporated in India from having as a director any person who is a director of any other banking company. Section 16(1A) further provides that such a banking company shall not have in its Board of directors more than three directors who are directors of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent of the total voting rights of all the shareholders of that banking company. These restrictions guard against conflicts of interest, interlocking control and concentration of influence over a bank’s management. Section 16(3) exempts directors appointed by the Reserve Bank and certain co-operative bank directors.