Mumbai: Axis Bank managing director and chief executive officer Shikha Sharma will leave on 31 December, India’s third largest private bank said, after its board granted her request to cut short her latest term of three years that begins on 1 June.

Sharma’s fourth term as MD and CEO, which was granted last year, was originally set to end in June 2021.

“In this connection, kindly note that Smt. Shikha Sharma, managing director and CEO of the bank, has requested the board to reconsider the period of her reappointment as the managing director and CEO of the bank to be revised from 1st June 2018 up to 31st December 2018," Axis Bank said in a stock exchange notice.

Currently in her third three-year term, Sharma joined Axis Bank as MD and CEO in June 2009, after spending nearly three decades at ICICI Group across its bank, investment banking and insurance arms. Last year, Axis Bank hired executive recruitment firm Egon Zehnder to find its next CEO, which conducted a preliminary search before the board decided to reappoint Sharma. On 8 December, the board gave her an extension as CEO for another three years starting June 2018.

On 1 April, The Economic Times reported that the Reserve Bank of India (RBI) had asked Axis Bank to review the reappointment. In a stock exchange notice, the bank had said its board followed a standard process for senior appointments, and forwarded its recommendations to the regulator and that the process was in progress.

“As Axis Bank goes for a change in leadership, there are grounds to rebuild credibility and regain currency with regulators and other stakeholders, which augurs well for the bank. So, it’s now possible to place this headwind behind and focus purely on fundamentals. There will also be earnings catalysts for the bank starting the first quarter of FY19, as the resolution of big-ticket NCLT cases begin kicking in," said A.S.V. Krishnan, vice-president, SBICap Securities.

Sharma’s request to end her tenure early comes at a time her bank has posted a sharp rise in bad loans.

Analysts say the central bank’s asset quality review (AQR) in late 2015 led to a rise in bad loans for most lenders including Axis Bank. In the quarters that followed, it turned out to be among the banks worst hit by the AQR. The gross non-performing assets (NPA) ratio, which was 0.94-1.68% between June 2009 and March 2016, jumped to cross 2% for the first time since Sharma took over.

It rose further to reach 5.28% by the end of 2017. During her tenure, Axis Bank’s gross bad loans have ballooned from Rs915 crore to Rs25,000 crore.

The stock of Axis Bank’s NPAs remained elevated, as bad loans assessed by RBI differed from those reported by the bank. In April 2017, RBI told banks to make a disclosure in their financial statements if the divergence between the bank’s and the RBI’s estimates exceeded 15%. Axis Bank, along with other leading banks, disclosed such divergences for fiscal 2016 and fiscal 2017 earnings.

Sharma is credited with turning Axis Bank from a predominantly corporate lender by expanding its retail base. The share of retail loans in Axis Bank’s total book rose to 46% at the end of December 2017 from 21% in June 2009, the quarter when Sharma took over.

On Monday, shares of Axis Bank Ltd rose 3.44%, or Rs17.20, to Rs517.90 on the BSE while the benchmark Sensex gained 0.48%, or 161.57 points, to end the day at 33,788.54.

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