IndusInd Bank may need to reset its 'committee of executives' now

Anil Rao's stay on 'committee of executives' to run daily ops on radar

This report has been updated.  IndusInd Bank may have to reset its “committee of executives” now that Anil Marco Rao has been named in the Securities and Exchange Board of India’s (Sebi’s) interim order on insider trading in the bank’s stock. 

Rao, who is IndusInd Bank’s chief administrative officer-consumer banking operations, is on the committee of executives put in place to manage daily operations, following the resignation of its managing director and chief executive officer (MD &CEO) Sumant Kathpalia along with Soumitra Sen, head-consumer banking. This arrangement was to oversee affairs at the bank under an Oversight Committee (OC) headed by board chairman Sunil Mehta until a new MD & CEO took charge. Others on the OC were the heads of the audit committee; remuneration and nomination committee; and the risk management committee.

 

Sebi had on Wednesday barred Kathpalia, Arun Khurana (former executive director and deputy CEO), Sushant Sourav, Rohan Jathanna (head of global markets group) along with Rao from trading in the securities market, following allegations of insider trading linked to an accounting discrepancy worth over ₹3,000 crore. In its order, the capital markets regulator held that these individuals had traded in the bank’s shares while being in possession of unpublished price-sensitive information. 

  Mails sent to both IndusInd Bank and the Reserve Bank of India (RBI) on the continuation of Rao on the committee of executives were not responded to. 

Sources pointed out that while Sebi’s order is an interim one, it is unlikely the banking regulator will not nudge the bank for a reset on Rao; and he may well have to step down from his current position. 

It is also possible that following the unearthing of issues which highlight lack of governance at the bank, the RBI’s iron-clad November 4, 2019 guidelines on the compensation of whole-time directors, CEOs, material risk takers and control function staff will come into play. While the central bank had said its November 4, 2019 circular will kick in only for pay cycles beginning from or after April 1, 2020, it can act on prior slip-ups by way of clawback or malus. This is because the said circular fine-tuned an earlier set of guidelines issued on January 13, 2012.

 

Under a cloud

  *  IndusInd Bank set up a “committee of executives” to manage daily operations following MD & CEO Sumant Kathpalia’s exit

  *  Anil Marco Rao, chief administrative officer-consumer banking operations, and Sushant Sourav, head-treasury operations, were part of the panel

  *  This was to oversee bank affairs under an oversight committee headed by board chairman Sunil Mehta until a new MD and CEO took charge

  *  RBI’s 2019 guidelines on the compensation of whole-time directors, CEOs and others may come into play, with lack of governance at the bank coming to light