RBI to offer clarity on CEO age: IndusInd Bank MD

For whole-time directors (including CEO) no maximum age is specified and decisions have been taken on a case to case basis

The Reserve Bank of India (RBI) is likely to issue a policy framework in the next few weeks that will offer more clarity on the age restriction for private sector bank chiefs, according to Romesh Sobti, managing director and chief executive officer of IndusInd Bank.

In 2013, the board of directors of IndusInd Bank had approved the re-appointment of Sobti as MD and CEO for a period of three years with effect from February 1, 2014. The move was approved by the bank's shareholders. But RBI permitted the re-appointment only for a year.

As it stands, Sobti's current term ends on January 31, 2015. While the exact reason is not known, it is widely believed that the banking regulator did not allow Sobti's re-appointment for three years because he will turn 65 in March, 2015.

“RBI has not yet come out with any policy as far as the age bar for private sector banks is concerned. But we understand that they are working on a policy and that we should have one shortly, sooner than later. Once that policy comes then we will know what happens in the future. So, as things stand today, the extension is for one year, which is till January of 2015. But we expect, I think in the coming weeks I would say if not months, we would expect RBI to come out with some sort of a policy framework, which will create lot more clarity,” Sobti told analysts during a recent interaction while responding to questions relating to his succession. Currently, a maximum age of 70 is stipulated for appointment or re-appointment of part-time directors in banks.  But for whole-time directors (including the CEO) no maximum age is specified and decisions have been taken on a case to case basis.

“The bank CEO’s job is an onerous one, and it is proposed that a maximum age of 65 be prescribed. It would however be wise for boards to recognise and make possible a succession process which brings in younger people as CEOs, which an excessively long tenure of an incumbent might otherwise preclude,” a committee headed by P J Nayak to review governance of boards of banks in India said in its report to RBI in May, 2014.

Sobti joined IndusInd Bank on February 1, 2008, as MD and CEO, taking charge from Bhaskar Ghose. Prior to this assignment, he was the executive vice president–country executive, India and head of UAE and sub-continent, at ABN AMRO NV.

Internal candidate
Sobti said the bank's board was already preparing a succession plan in case his term is not extended beyond January, 2015. “The board has applied its mind very diligently on this subject, not today but 12 months ago if not longer. So, they have full clarity on plan B.It is not that you will suddenly spring up one day and say all right who is the next successor? I think there is full clarity in the minds of the board and the nomination committee on how succession will happen,” Sobti said.

He said that the overriding theme of succession at IndusInd Bank is that there should be continuity of thought and action and added that his successor is likely to be from within the bank.

"I can give you a full assurance...The first part is that everybody who will be involved in decision making process is convinced that succession should be from within. That conviction is definitely there," he said.