'No communication from RBI on CEO succession plan,' clarifies Kotak Mahindra Bank

Kotak Mahindra Bank Ltd on Monday refuted a news report that said Reserve Bank of India wants the Mumbai-based lender to pick an outsider as next chief executive.

"We would like to state that there is no communication, formal or informal, from RBI to Kotak Mahindra Bank or its Board members on CEO succession," said the bank in a stock exchange filing.

At 1410 hours on Monday, Kotak Mahindra Bank's scrip on Bse was trading 1.3% lower at Rs 1,853.15.

Earlier on Monday, Bloomberg reported that RBI is "nudging Kotak Mahindra Bank Ltd to select someone outside the lender’s ranks to succeed Uday Kotak as the next Chief Executive Officer".

The report also said that RBI has conveyed its view to board members of Kotak Mahindra Bank, which the lender said is "completely incorrect and baseless".

Quoting sources, the report also said that "RBI is reviewing whether stakes the banking group holds in two wholly-owned insurance units pose any risks to the firm’s stability".

Kotak Mahindra Bank said it "holds all regulatory approvals" in this regard.

"The bank holds all regulatory approvals including from RBI for its stake in its insurance subsidiaries and has not received any formal or informal communication to the contrary," said the lender.

The bank 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 News reported earlier this year. The RBI has a final say on appointing heads of India’s lenders though the banks' boards decide on the shortlist of candidates. 

RBI had said in 2021 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.

Uday 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," said the report quoting sources.

Uday Kotak will continue as a non-executive board member and strategic shareholder after he steps down from the whole-time role, the bank had said. The veteran banker, who launched Kotak Mahindra Finance with three people and a 300 square feet office in 1985, is set to retire as MD & CEO of the bank in December 2023.

He recently said that the financial sector needs significant capacity building to meet the aspiration of making India a $30-trillion economy by 2047.