RBI may not give extension to Romesh Sobti, Aditya Puri after terms end

Current RBI thinking is not to align pvt bank CEOs' age limit with Companies Act at 75 years

The Reserve Bank of India (RBI) may not give an extension to Romesh Sobti and Aditya Puri — the helmsmen at IndusInd Bank and HDFC Bank — after their current terms end.

The thinking within the central bank’s senior decision-making hierarchy is that there is no case as of now to increase the age limit for whole-time directors on private bank boards to 75 from 70 to bring it in alignment with the Companies Act (2013). Sobti turns 70 on March 23, 2020; Puri on October 26, 2020.

If the RBI is to go ahead with it, it would also set the retirement age for heads of private banks once and for all. It is the lack of a clearly articulated age ceiling which has led to speculation over further extensions for Sobti and Puri.

A well-placed source said, “Nothing on the issue has been communicated to either bank.” The reason for this is that neither Sobti as managing director (MD) and chief executive officer of IndusInd Bank nor Puri (as MD) of HDFC Bank has formally sought an extension from the RBI for their respective tenures. But it has been widely held that backchannel talks have been going on with the central bank on the matter for some time now.

Attention had been focused on whether the central bank will align the age limit for directors on banks with the Companies Act. This would have been the requisite first step for Sobti and Puri to continue to be on the boards after having turned 70. Both had articulated an interest to continue their association with their respective banks in the past.

The banking regulator had extended the retirement age of chiefs of private banks to 70 in September 2014 from 65 when the Companies Act, 2013, replaced the earlier one enacted in 1956.

And in the process had not gone along with the PJ Nayak Committee’s recommendation of 65 as the ceiling.

Said an observer: “Even when the age limit was increased to 70, the beneficiaries of the move were Sobti and Puri. The rest of the current crop of corner room occupants at private banks is yet to turn 60.” It is surmised that the RBI may be of the view that another extension would have been bad optics; it would have been seen to be favouring only two individuals. 

While Sobti offered himself for reappointment at the bank’s annual general meeting held on August 17, 2019, HDFC Bank’s last stated position is that its board will identify a successor to Puri, and work to ensure this is done in a manner that will allow appropriate time for effective transition of responsibilities. It was also always held that Sobti’s is the ‘test’ of the central bank’s thinking on a tenure extension, as he turns 70 earlier.

Beyond the corner office

• RBI move to settle ambiguity on private bank CEO age limit

• Romesh Sobti will turn 70 on March 23, 2020; Aditya Puri on October 26, 2020

• The PJ Nayak committee had recommended 65 as the age limit

• Giving fresh extensions to Sobti and Puri would have been bad optics