The succession process at the IndusInd Bank started nearly five years ago when Romesh Sobti, who turned around the private bank, was about to retire as its MD & CEO. The bank had already requested Reserve Bank of India (RBI) for an extension but a favourable response was unlikely because it meant setting the private bank CEOs' retirement age at 70 years.
The 10-member board of the bank then started the search for a successor. The entire co-executive team of 15 professionals were considered for the top job. The senior most with a big vertical or exposure were Suman Kathpalia, Head (Consumer banking), Suhail Chander, Head (Corporate Banking & Commercial Banking) and Paul Abraham, chief operating officer.
In a freewheeling interview with Business Today last week, Sobti explained the succession process in general terms without directly disclosing any names.
Sobti said that the bank was not embedded to hierarchy in terms of seniority. "The core executive team members are of the same genre. Somebody may be few years younger and somebody may be few years older. But they all are of the same band," said Sobti.
"This is a natural way of how an evolved organisation works on succession," said Sobti.
Sobti quotes a survey of top 500 American companies which found that 80 per cent of the successors in those companies came from within the institution. That was probably the reason why the bank explored the internal talent. The rival HDFC Bank whose MD & CEO Aditya Puri will be retiring in October this year is exploring the possibility of having an outsider. Axis Bank saw an outsider Amitabh Chaudhry from HDFC Life Insurance taking over the top job. Similarly, Yes Bank got Ravneet Gill from Deutsche Bank as its new MD & CEO.
Elaborating on the process, Sobti said the succession process generally involves three-four candidates who are cut above the rest. "They display leadership skills. They have skills and expertise in people's management. They are leaders in their own domain. And then you see one or two winners emerging," said Sobti.
In case of IndusInd Bank, a few potential candidates opted out because of personal reasons.
But then the RBI sprang a surprise by extending Sobti's tenure for another five years until March 2020. It meant extension for Aditya Puri and others till they complete 70 years.
The selected candidates remained as potential candidates for a change in future. "The grooming process starts in terms of exposing successor(s) to other verticals, platforms, risk management, operation, treasury, asset liability management and balance sheet management. "The whole team participates," says Sobti.
"The process becomes more intense as the time comes," said Sobti. In fact, it was an interactive process between the board and Sobti.
Finally on October 31, the board put its stamp on the name of Sumanth Kathpalia and dispatched the name to the RBI for approval.
The bank didn't disclose the name to media or investors as it has to pass the test of RBI for 'Fit and proper' for a director and the new MD & CEO. As per the guidelines, the RBI provides four months to do the due diligence.
After almost four months, the RBI gave its approval to appoint Kathpalia as CEO for the next three years. He will take charge on March 24.