The implementation of Reserve Bank of India’s discussion paper, which restricts the term of the CEOs and WTDs to 10-15 years, may force Kotak Mahindra Bank chief Uday Kotak to relinquish his position.
The paper, titled ‘Governance in Commercial Banks in India’, was released by the central bank on Thursday. It proposes to limit the tenure of bank Chief Executive Officers (CEOs) and Whole Time Directors (WTDs) to 10 years if the person is from the promoter group, and 15 years if from non-promoter group.
Other than banking veteran Aditya Puri, CEO of HDFC Bank, who is set to retire by the end of this year, Uday Kotak is one of the few longest-serving CEOs in the private sector banking space, helming Kotak Mahindra Bank since 2003.
RBI has effected changes at the top level in private sector lenders like Axis Bank, Yes Bank and IndusInd Bank.
The discussion paper by the RBI bats for greater power for bank boards, separation of ownership from management and setting up of proper risk management strategy.
“The objective of the discussion paper is to align the current regulatory framework with global best practices while being mindful of the context of the domestic financial system,” the RBI had said.
The paper said that growing size and complexity of India’s financial system underscores the significance of strengthening governance standards in banks.
Stakeholders can send their comments on the discussion paper by July 15, 2020.