Nayak appointed UTI Bank exec chairman

UTI Bank shareholders today approved the appointment of P J Nayak as executive chairman in accordance with the Banking Regulation Act.

According to the Banking Regulation Act 10(B), a bank chairman can either be whole-time or part-time. The whole-time chairman is in control of the day-to-day affairs of the bank.

The bank will now seek the approval of the Reserve Bank of India, which last week wrote to private sector banks asking large-sized private sector banks to have a non-executive director as chairman and a chief executive officer and managing director.

However, the RBI has also sent a separate communication to UTI Bank stating that it would convey its decision on Nayak's appointment after the bank formally applies to it after the shareholders' approval.

"We will give our decision after they get back to us with the shareholders' approval. We had asked the bank to split the position to ensure that the management and the governance of the bank is not run by a single individual. This is in keeping with the corporate governance norms. You cannot have one person running the day to management of the bank and chairing the board,'' the RBI official added.

"We have submitted a formal application to the Reserve Bank of India today to appoint P J Nayak as wholetime chairman. We have received the circular on corporate governance (which seeks to ensure that "large" private sector banks do not have a whole-time director as chairman) . We are not a big bank like ICICI Bank or HDFC Bank. In future, when UTI Bank becomes bigger, we can consider appointing a managing director or deputy managing director,'' said a senior UTI Bank official.

"It is difficult to say what the Reserve Bank of India will say. Earlier we went according to the letter sent by the RBI,'' said S B Mathur, administrator, SUUTI. Banking sources indicate that Nayak's appointment is expected to sail through with a caveat that the bank would appoint a managing director within a certain period.

It is interesting to note that the bank board is seeking RBI's clearance to appoint P J Nayak as whole-time chairman for two years.

"After two years we would have a second line of executives with decent exposure and capability to take over from Nayak. The next two years will be critical for the bank as it is going through a rebranding exercise and is also in the process of entering new businesses like insurance, mutual funds and private equity. A chairman requires to have a different perspective. The RBI may consider these aspects,'' added the banking source.

The shareholders also ratified the proposed change in the name of the bank to Axis Bank.

The bank also received shareholder approval to amend its articles of association to appoint a whole-time chairman. This amendment to the Articles of Association will be effective from August 1, 2007 as Nayak's term as chairman and managing director of the bank ends on July 31.