DCB Bank, RBL, Federal Bank bosses' terms to come up for renewal

RBI decision will clarify its stand on 15-year cap mentioned in discussion paper

The tenures of corner-room occupants at three private banks — DCB Bank, RBL Bank, and Federal Bank — will be up for review in 2021, and will make it clear if the Reserve Bank of India (RBI) will hardcode the maximum tenure for the helmsmen at 15 years.

First up will be Murali Natarajan’s term as managing director (MD) and chief executive officer (CEO) of DCB Bank, which ends on April 28, followed by Vishwavir Ahuja at RBL Bank on June 30, and Shyam Srinivasan of Federal Bank on September 22. While the trio is well within the maximum 70-year age limit set for MDs & CEOs of private banks, all of them have spent close to a dozen years at the crease.

The RBI’s stance is of particular import as these reviews come after it released a discussion paper that made a case for capping tenures at 15 years for professional (non-promoter) private bank MDs and CEOs. Two other corner room occupants will also be up for review — C S Ghosh of Bandhan Bank on July 10, and Sandeep Bakhshi on October 15. But the duo is not seen as being affected. Even if the three chiefs mentioned earlier are to get extensions for another three-year term, that might well be the last. “A technical aspect here is that the central bank is yet to issue a circular on the matter. What we have is only a discussion paper,” said a source.

RBI is expected to indicate on extension of their current terms if it is to be the last, and which will mean that a succession plan is to be in place. The discussion paper had observed that MDs and CEOs who “have completed 10 years (promoter) or 15 years (professionals) shall have two years or up to the expiry of the current tenure, whichever is later, to identify and appoint a successor”, who has proven ability to run a large business. “The search for a successor is part of everyday operations, but we believe it’s too soon to start a conversation around succession planning just yet. Let the final guidelines come out and then we will see,” said a source at one of the three banks.

“We will need to see if RBI will offer another term of extension when sought next year. We already have a succession plan in place, there is no need to fast track it or even go forward with it, until we hear from the regulator,” said a source at another bank. It is hoped that RBI will help grandfather the baton-change at these banks.

“Large institutional investors had raised the issue of visibility of MDs and CEO’s tenure when RBI released its discussion paper at a time when banks were at a critical stage to raise capital post-Covid,” said a source. It was also pointed out that abrupt changes can have an immediate impact given that a one-time loan recast policy is in the works.