Uday Kotak may not be the only private bank chief who will be forced to step down when his current tenure ends in December 2023. There are question marks over Vishwavir Ahuja, who leads RBL Bank, Shyam Srinivasan of Federal Bank and Murali Natarajan at DCB Bank — all of whom will complete more than 12 years in office at the end of their current terms in June, September and April next year, respectively.
The key question here is will they get another extension.

Brokerages are also awaiting clarity with regard to Bandhan Bank and AU Small Finance Bank on whether the RBI would consider their CEO’s timeline after the entities converted into a bank or SFB or before that period.

On Monday, the RBI put out directions with regard to appointment of directors and committees of the board in private sector banks, small finance banks (SFBs) and foreign banks who are wholly owned subsidiaries.
A key instruction was that the post of the managing director & CEO or whole time director cannot be held by the same incumbent for more than 15 years. Observers feel Uday Kotak, the promoter and CEO of Kotak Mahindra Bank, will be forced in December 2023 as he has completed more than 15 years at the lender.

“The limit on the MD & CEO tenure has come as a negative development for Kotak Bank. We remain watchful of the continuity of some other mid-sized private bank CEOs such as RBL Bank, Federal Bank, and DCB Bank – their current MDs/CEOs have completed 10–12 year tenures and are thus eligible for an extension. The RBI recently granted a year-long extension to the CEO of DCB Bank,’’ analysts at Motilal Oswal said.

N.Kamakodi, MD & CEO of City Union Bank, may continue up to May 2026, the brokerage said.
Analysts at Axis Securities said that the upper limit of 15 years for MD & CEOs could result in fast-tracking the succession planning in banks like DCB Bank, Federal Bank, and RBL Bank.

The RBI also said that the MD & CEO or WTD, who is also a promoter or major shareholder, cannot hold these posts for more than 12 years. However, in extraordinary circumstances, they may be allowed to continue up to 15 years at the sole discretion of the RBI.

According to the banking regulator, while examining the matter of re-appointment of such MD & CEOs or WTDs within the 12 or 15 years period, the level of progress and adherence to the milestones for dilution of promoters’ shareholding in the bank will also be factored.

While these directions will come into effect from October 1, 2021, the RBI said that banks with MD & CEOs or WTDs who have already completed 12 or 15 years they shall be allowed to complete their current term if it is already approved by the Reserve Bank.