Uday Kotak’s Succession In Kotak Mahindra Bank Under RBI Review: Report

Uday Kotak’s Succession In Kotak Mahindra Bank Under RBI Review: Report

[ad_1]

The Reserve Bank of India (RBI) is nudging Kotak Mahindra Bank Ltd. to select someone outside the bank’s ranks to succeed founder and Asia’s richest financier Uday Kotak as the next chief executive officer (CEO), citing sources privy to the development news agency Bloomberg said. The sources told the news agency that the RBI has conveyed its view to board members of Kotak Mahindra Bank and Uday Kotak. The regulator is also reviewing whether stakes the banking group holds in two wholly-owned insurance units pose any risks to the company’s stability, the sources said.

Uday Kotak has a net worth of about $14.5 billion, most of which comes from his 26 per cent stake in the bank, according to the Bloomberg Billionaires Index. He has led the bank since it was converted into a lender in 2003 from a non-banking finance company.

According to the report, the Centre has tightened rules limiting bank CEOs’ tenure to a maximum period of 15 years and has been reviewing the stakes that banks hold in insurers in order to bolster the financial system. In 2021, the RBI had said that the outgoing head should take a three-year cooling period and shall not be “appointed or associated with the bank or its group entities in any capacity, either directly or indirectly,” to ensure there is a clean break for the outgoing head from the bank.

Kotak’s tenure as CEO of India’s fourth-largest private lender ends this year. He has received shareholder approval to subsequently remain on the board. Choosing one of his lieutenants from within the bank’s ranks, while he is on the board, will defy the spirit of the regulations, leaving Kotak in a position to potentially influence decisions, according to the people.

A spokesperson for Kotak Mahindra said “current holdings of Kotak in its insurance companies are as per the extant regulatory prescriptions and processes,” and declined to comment on the CEO selection.

The financier had engaged consulting firm Egon Zehnder to lead a global search for a CEO and its top executives Shanti Ekambaram and KVS Manian were the internal candidates for the job, Bloomberg reported earlier this year. The RBI has a final say on appointing heads of the nation’s lenders though the bank’s boards decide on the shortlist of candidates.

Kotak Mahindra’s holdings in units — Kotak Mahindra Life Insurance Co. and Kotak Mahindra General Insurance Co. — are also under review as the central bank assesses the banks’ stakes in insurance companies, the people said. It is the only major bank in the country with fully-owned insurance subsidiaries.

In the past, Uday Kotak had challenged the central bank in court to retain his stake in the lender at a level above the regulator’s threshold. The bank had then argued that the central bank wasn’t empowered to dictate founders’ shareholdings as the RBI sought to separate management and ownership functions at lenders to improve corporate governance.

[ad_2]

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *