According to persons familiar with the situation, India’s banking regulator is pressuring Kotak Mahindra Bank Ltd. to choose a leader outside of the lender’s ranks to succeed its billionaire founder Uday Kotak as the next CEO.
They claimed, requesting anonymity because the conversation was confidential, that the Reserve Bank of India had explained its position to the board members of Kotak Mahindra Bank and Asia’s richest financier. According to the sources, the regulator is also examining whether the banking group’s ownership shares in two wholly owned insurance units pose any stability threats to the company.
In order to improve the country’s financial system, India has tightened regulations restricting the tenure of bank CEOs to a maximum of 15 years and has been examining the shares that banks have in insurers. To guarantee a clean split for the departing head from the bank, the RBI had stated in 2021 that the exiting chief should take a three-year cooling-off period and shall not be “appointed or associated with the bank or its group entities in any capacity, either directly or indirectly.”
This year marks the end of Kotak’s time as CEO of the fourth-largest private lender in India. He has been given the go-ahead from shareholders to continue serving on the board. According to the sources, Kotak will be in a position to potentially sway decisions if he chooses one of his lieutenants from within the bank’s ranks while he is on the board.
According to a Kotak Mahindra spokesman, “current holdings of Kotak in its insurance companies are as per the extant regulatory prescriptions and processes,” and she declined to comment further on the CEO choice. Emails asking an RBI official for comments went unanswered.
According to a report by Bloomberg News earlier this year, the financier had hired consulting firm Egon Zehnder to oversee a global search for a new CEO, and its top executives Shanti Ekambaram and K.V.S. Manian were the internal candidates for the position. Though the bank boards select the shortlist of candidates, the RBI has the final say in who leads the country’s lenders.
Coverage Units
According to the sources, the central bank is also examining Kotak Mahindra’s holdings in the insurance businesses Kotak Mahindra Life Insurance Co. and Kotak Mahindra General Insurance Co. The only significant bank in the nation with wholly owned insurance businesses is this one.
Despite working with consultants like Morgan Stanley for several months to reduce its shares in the insurers, no transactions have yet been completed, according to people with knowledge of the situation. A Morgan Stanley representative declined to comment.
In the past, Kotak had sued the RBI to keep his ownership share in the company at a level higher than the regulator’s cutoff point. When the RBI tried to segregate the management and ownership activities at lenders in order to promote corporate governance, the bank had contended that the central bank lacked the authority to mandate founders’ shareholdings.
According to the Bloomberg Billionaires Index, Kotak has a net worth of around $14.5 billion, the majority of which derives from his 26% ownership in the bank. Since the bank’s transformation from a non-banking financial company to a lender in 2003, he has served as its president.