Mumbai: India’s third largest private company by assets, Axis Bank Ltd, is set to start the process of identifying executives to take over the top two positions in the bank, with the term of P.J. Nayak, its current chairman and chief executive officer?(CEO)?ending?on?31?July.
Following the Reserve Bank of India’s (RBI) directive, the bank will have to split the post of chairman and chief executive officer. It isn’t known if the bank will ask Nayak to continue as non-executive chairman or indeed, whether he will accept such a request.
Many old private banks, including Federal Bank Ltd, South Indian Bank Ltd, Karnataka Bank Ltd, Karur Vysya Bank Ltd, City Union Bank Ltd and Ratnakar Bank Ltd, recently split the top post at the regulator’s insistence.
Long run: Chairman and CEO of Axis Bank P.J. Nayak. In May 2007, the bank board passed a resolution recommending Nayak, then chairman and MD, for the post of the bank’s executive chairman for two years. Ashesh Shah /Mint
ICICI Bank Ltd, India’s largest private sector lender, identified the successor of its current CEO and managing director K.V. Kamath in December, five months before he retires. The bank’s joint managing director and chief financial officer Chanda Kochhar will replace Kamath in May. Kamath will be the bank’s non-executive chairman, replacing N. Vaghul.
Among old private banks, Federal Bank split the post of chairman and CEO in November after RBI refused to renew the tenure of M. Venugopalan. According to a director on the board of Federal Bank, RBI has cleared the appointment of A.M. Salim as the bank’s chairman and Venugopalan will continue as the managing director and CEO.
Ananthakrishna (he uses only one name), chairman of Karnataka Bank, told Mint: “We have sent a proposal to RBI, seeking its permission to let me continue as a non-executive chairman of the bank.” The regulator is expected to give its nod to one of the three senior executives of the bank as its CEO. Currently, Ananthakrishna enjoys executive powers. Karur Vysya Bank has appointed Athi S. Janarthanan as its chairman and P.T. Kuppuswamy, the former chairman and CEO, has been named managing director and CEO.
South Indian Bank too has also split the top post by appointing G.A. Shenia as non-executive chairman while V.A. Joseph will be managing director and CEO. City Union Bank Ltd and Ratnakar Bank Ltd are also willing to split the top post. “I am aware of the issue and we will have to split the post,” said an Axis Bank director who spoke on the condition of anonymity.
An executive at the bank said the senior-most executive director could be considered for the post of managing director and CEO. “The board is meeting on 9 January to announce its quarterly results. The succession issue is not on the agenda as of now,” said another director who did not wish to be identified.
Currently, the bank has four executive directors—M.M. Agarwal, V.K. Ramani, S.K. Chakrabarti and Hemant Kaul. Agarwal is the senior-most among them.
Nayak declined comment on the issue. R.H. Patil, director and member of the remuneration and nomination committee also declined comment.
In May 2007, the board of Axis Bank passed a resolution recommending its then chairman and managing director Nayak for the post of the bank’s executive chairman for a term of two years starting 1 August. Had the board not decided to make him executive chairman, Nayak would have stuck to his decision to quit because RBI was against the same individual holding the posts of chairman and managing director.
India’s central bank wanted to split the post of chairman and managing director, in accordance with the recommendation of a panel that was set up in 2002 under the chairmanship of former Hindustan Unilever Ltd chairman A.S. Ganguly. The panel was in favour of splitting the top post in all large banks for the sake of better corporate governance.
However, RBI later relented and allowed Nayak to continue to hold the position.
Between 2000, when Nayak took over at the bank, and now, UTI Bank’s net profit has shown a compound annual growth rate of at least 40%. Its deposits, advances and total assets too have grown by around 35%.
Nayak’s initiation into the Indian financial sector was in 1996 in the role of an executive trustee of the Unit Trust of India (UTI), the country’s largest mutual fund until recently, after a stint at the department of economic affairs, ministry of finance, where he was joint secretary, in charge of the capital markets division.
The administrator of the specified undertaking of UTI, the promoter of Axis Bank, will have a major say in the appointment of new CEO.