Mumbai: Axis Bank Ltd’s chairman and chief executive officer (CEO) Pangal Jayendra Nayak resigned on Monday, a little more than three months ahead of the end of his tenure. The reason: the appointment of an “outsider” as the bank’s new managing director and CEO.
Nayak has all along been pushing for an “insider” for the post, according to several Axis Bank insiders. He gave up on Monday afternoon, after a long battle with the board that sealed the deal in favour of Shikha Sharma, managing director and CEO of ICICI Prudential Life Insurance Co Ltd. Nayak, they say, was backing Hemant Kaul, who heads the bank’s retail operations.
Nayak’s fight with the board is not new. Since he took over as chairman and managing director of UTI Bank Ltd, the former avatar of Axis Bank, in January 2000, Nayak has offered to resign twice but has been persuaded to stay back both times.
Unquestionable acumen: Despite his flurry of resignations, P.J. Nayak’s track record as a banker and his role at Axis Bank have been exemplary. Ashesh Shah / Mint
Nobody questions Nayak’s banking acumen and integrity, but till recently, bank’s insiders would complain in private that he was not doing enough to build the second line of leadership and that he made himself indispensable by not grooming a successor. Ironically, he put in his papers when the bank’s board refused to accept somebody who Nayak was grooming as his successor. All board members, except Nayak, supported Sharma.
Nayak had earlier threatened to resign in 2007 when the Indian banking regulator did not want him to hold the dual post of chairman and managing director. He wanted to step down on 31 July 2007 on reaching 60. That was prevented by the board by passing a resolution, recommending Nayak for the post of the bank’s executive chairman for a term of two years.
The Reserve Bank of India, or RBI, was in favour of splitting the post of chairman and managing director, in accordance with the recommendation of a 2002 panel chaired by former Hindustan Lever Ltd chairman S. Ganguly. The panel wanted to split the top post in all large banks for better corporate governance.
RBI had apparently told Nayak about its decision to split the post much in advance, and even suggested that he put in place a succession plan for the top job at the bank. But there was no formal communication of the regulator on this issue.
Ultimately, RBI accepted the board’s recommendation and allowed Nayak to hold the dual charge for two years with an understanding that it would be split when he retires in July 2009.
This was the second instance of Nayak offering to resign from the bank, an assignment he took over after resigning from the Indian Administrative Service.
The first time he offered to resign was in December 2004. At that time, the bank wanted to split the chairman and managing director’s (CMD) post. It had asked Nayak to continue as MD after his five-year term came to an end.
Nayak rejected the offer and quit, but the board quickly made peace by deciding to keep him at the helm for another five years.
Apart from two resignation offers, Nayak also went on a month’s leave in July 2002, and resumed work only after the bank’s board exonerated him from an indictment in a draft report of a parliamentary committee. The indictment was for UTI Bank’s failed merger with another private bank, Hyderabad-based Global Trust Bank Ltd, that was linked to a stock market scam.
Nayak’s initiation into the Indian financial sector was in 1996 as an executive trustee of the erstwhile Unit Trust of India, India’s oldest mutual fund, after he had a stint at the department of economic affairs, ministry of finance, and was joint secretary in charge of the capital markets division.
Instances of bank chiefs offering to resign and their fights with the board are not new in India, but there has not been another instance of a CEO putting in his papers so many times. Nevertheless, Nayak’s track record as a banker has been exemplary. Since 2000, when Nayak took over the bank, Axis Bank’s net profit has grown at a compounded annual growth rate of at least 40%. The growth in other key business parameters such as deposits, advances and total assets, too, have been superlative. He has transformed a small, institution-owned private bank into India’s third largest private lender, with a lot of aggression and passion for excellence.