Most bank CEOs have to hang up boots before 70 under latest RBI guidelines

RBI's CEO tenure cap: Banks have to expedite succession planning after RBI's new rules on CEOs term

The latest norms regarding the tenure of the MD & CEOs of private sector banks that was announced by the Reserve Bank of India (RBI) on Monday will see a majority of the executives to hang up their boots before 70, the retirement age. Some of them will be eligible after a wait of three years.

At the one end of the spectrum is N Kamakodi, MD & CEO of Kumbakonam-based City Union Bank. Kamakodi took charge in May 2011 when he was 37 – the youngest CEO to be appointed to a private sector bank. Last year, the banking regulator approved his reappointment for another three years, starting May 1, 2020. When the present term ends in 2023, he will be 50. Kamakodi has to wait for three years, before he can be appointed again. The retirement of CEOs in private sector banks is 70.

“Dr Kamakodi, the CEO of CUBK completes his 15-year tenure in May 2026. Two years before the retirement they will search for a new CEO,” broking firm Macquarie said in a note.

The latest norms of CEO tenure mandates that the post of MD & CEOs (as well as wholetime directors) cannot be held by the same incumbent for more than 15 years. Thereafter, the individual will be eligible for re-appointment as MD & CEO or WTD in the same bank, after a minimum gap of three years.

“MD & CEO or WTD who is also a promoter/ major shareholder, cannot hold these posts for more than 12 years,” the new norms said.

On the other end of the spectrum is Shasidhar Jagdishan, MD & CEO of HDFC Bank. He was appointed in October 2020, when he was 54. He can continue in the current position for a maximum of 15 years, that is till the age of 69. Similarly, IndusInd Bank CEO Sumant Kathpalia (55) who was appointed in March 2020, will be 69 years when he completes 15 years as CEO.

Vishwavir Ahuja who was appointed RBL Bank’s MD & CEO in 2010; got an extension for three year earlier this year, till June 29, 2024. Ahuja, 61, will be eligible for extension for one year when his present term ends in 2024, when he will be 64.

Trend in the recent appointments suggest that private banks prefer CEOs to have a longer tenure as most of them are appointed when in their mid-50s.

There are a few uncertainties also, at least for two banks – Federal Bank and DCB Bank. Federal’s Shyam Srinivasan (58) was appointed in 2010 and last his term was extended by one year till September 2021.

Similarly, Murali Natarajan (58) who took charge as DCB Bank MD & CEO in May 2009 – his current term was extended for a period of one year from April 29, 2021.

“The upper limit of 15 years for MD&CEOs could result in fast-tracking the succession planning in banks like DCB, Federal, and RBL. More clarity is awaited on certain appointments (Federal Bank/DCB) where the RBI has provided only one-year extensions,” Axis Securities said in a note to its clients.

The Macquarie report said clarity is also required on Bandhan Bank MD & CEO – Chandra Shekhar Ghosh, who is also a promoter of the bank.

“Note that Bandhan was converted to a bank 5 years ago. So, if RBI considers that timeline (the date of conversion to a bank) as the threshold then Mr.  Ghosh, the promoter CEO, has a longer tenure,” the report said.  

However, the report observed that RBI has said that 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. “…considering Bandhan’s track record in meeting these shareholding norms, there perhaps could be a reluctance from RBI in our view,” the report said.

The latest norms prescribe promoter-CEOs will be able to continue for 12 years, apart from extraordinary circumstances in which case it will be allowed for 15 years. The norms also specify that those who have already completed 12/15 years as MD & CEO or WTD, will be allowed to complete their current term as already approved. As a result, Uday Kotak (62), MD & CEO of Kotak Mahindra Bank can hold the post till December 2023, that is till the end of his current term. 

Table: Status of tenure of private Bank MD & CEOs

Bank	MD & CEO	Age	Initial Date of appointment	Re-appointment valid till
RBL Bank	Vishwavir Ahuja	61	June 2010	June 2014
DCB Bank	Murali Natarajan	58	May 2009	April 2022
City Union Bank	N Kamakodi	47	May 2011	May 2023
Federal Bank

Shyam Srinivasan 58 September 2010 September 2021 Bandhan Bank Chandrashekar Ghosh 61 December 2014 July 2021 AU SFB Sanjay Agarwal 51 April 2017 April 2023 HDFC Bank Sashidhar Jagadishan 55 October 2020 October 2023 IndusInd Bank Sumant Kathpalia 55 March 2020 March 2023 ICICI Bank Sandeep Bakshi 60 October 2018 October 2021

Axis Bank

Amitabh Chaudhry 56 January 2019 December 2021

Kotak Mahindra Bank

Uday Kotak 62 May 2003 December 2023

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd