Tuesday, July 27, 2021
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Blow to Uday Kotak as RBI caps tenure of bank founders, CEOs

The Reserve Bank of India has capped the tenure of a bank CEO at 15 years in what could be a blow to where founder CEO Uday Kotak may not be eligible for another term. The central bank in its latest corporate governance norms also said that no one can be a non-executive director either beyond 75. The norms wont be applicable to state-run banks and foreign bank that operate as branches.

“The post of the MD & CEO or whole time director (WTD) cannot be held by the same incumbent for more than 15 years,” the regulator said. “The individual will be eligible for re-appointment in the same bank, if considered necessary and desirable by the board, after a minimum gap of three years, subject to meeting other conditions.”

The regulator further stipulated that the individual seeking reappointment will not be appointed or associated with the bank or its group entities in any capacity, either directly or indirectly in the three-year cooling period.

The RBI also capped tenure of promoter shareholder bank chiefs to 12 years, with a provision to extend it by three years at the regulator’s discretion.

“While examining the matter of re-appointment of such MD&CEOs or WTDs within the 12-15 years period, the level of progress and adherence to the milestones for dilution of promoters’ shareholding in the bank shall also be factored in by the Reserve Bank,” the regulator said.

Kotak Mahindra Bank founder MD Uday Kotak was reappointed by the RBI for a period of three years starting January 2021. Kotak has been the MD of the bank since 17 years. As per the new norms Kotak would not be eligible for a reappointment.

The RBI also clarified that the upper age limit of all private sector bank chiefs would not extend beyond 70 years. Though it stipulated that bank boards are free to prescribe a lower retirement age for such persons.

Under the new guidelines the upper age limit of non-executive directors including the bank chairman has been set at 75 years. The regulator stipulated that a non-executive director cannot continue to be on the board for more than eight years.

“After completing eight years on the board of a bank the person may be considered for re-appointment only after a minimum gap of three years,” it said. “This will not preclude him/her from being appointed as a director in another bank subject to meeting the requirements.”

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