Uday Kotak, 64, is a banker’s banker. someone to whom professionals go for advice. Kotak Mahindra Bank (KMB), which he was instrumental in setting up, has been a case study in the book on banking security. It is to his credit that there has been no scam in the bank under his leadership. Indeed, his stature in financial circles remains significant among peers, not least for his views and comments. His expertise is sought at the highest levels of financial administration. For example, he was tapped to help rescue IL&FS and head a panel of the Securities and Exchange Board of India on corporate governance. Stakeholders of his bank will be pleased with the news that he may continue as a non-executive director on its board after he retires as managing director and CEO by the end of December. However, it may fall under a rule laid down by the Reserve Bank of India (RBI), under which promoter CEOs will have to relinquish their terms after the end of office. on Wednesday, Peppermint The report added that the regulator is examining whether Kotak’s reappointment will pass muster.
As per RBI’s April 2021 guidelines, the promoter chief can occupy the corner office of the bank for only 12 years, with a relaxation of three years if deemed in its best interest. If they want to rejoin the bank, they will have to step aside for a three-year cooling-off period in which all links will be broken. And all this will be subject to the age limit of 70 years. However, KMB can argue that its founding CEO does not want to return as its boss, so no cooling off period applies. While RBI regulations do not prohibit appointing a promoter chief as a non-executive member of the board, it may also defeat a regulatory purpose. As is clear from the RBI’s discussion paper released in June 2020, the general intent of the rule was to limit promoters’ influence on bank operations beyond a point, reducing room for abuse of power in a business licensed to take deposits. A security measure for. If an influential top leader who is closely identified with the bank remains around, a new chief executive may find it difficult to exercise autonomy. In his pitch to shareholders on Kotak’s stay-on offer, which garnered 99% approval, KMB played a key role in the context of today’s global scenario, as the bank sought to catalyze India’s economic growth. This seems like a role beyond his presence as a part owner of the equity of KMB, whose mandatory dilution has also been under the watchful eye of the RBI.
need one Prima facie Given the divergence in interpretation of the rules attains the proportions of a conflict between the ownership of KMB and regulation of the sector, it can be argued that the RBI rules are too restrictive. Recall that fixed tenure for top positions came only after the failure of Yes Bank under its founder-boss Rana Kapoor. In Kotak’s case, not only is his record spotless, but his bank’s success has earned him a rare reputation as an institution builder. That is why if he opts for retirement next year, it will be a fitting tribute to his great achievement as a distinguished banker. By definition, an institution must rise above the individuals who created it. This is the test that lies ahead for KMB. And it is for the Kotak heirs in the corner office to see it through. Meanwhile, we await clarity on RBI’s stand on his board membership. What happens in this bank will set a precedent for others and hence the rules should always be clear.
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