RBI’s new guideline set to impact Kotak Mahindra Bank’s top deck
Share price of Kotak Mahindra Bank tanked in early trading Tuesday on concerns over the Reserve Bank of India’s (RBI) new guidelines capping the tenure of MDs and CEOs of private banks.
In a new set of instructions on corporate governance in private sector banks issued on Monday, the apex bank formally capped the tenure for MDs and CEOs or whole-time directors at 15 years. However, they are eligible for reappointment after a three-year cooling-off period.
The tenure of CEOs who are part of the promoter group or large shareholder is capped at 12 years with a maximum extension of up to 15 years at the discretion of RBI.
Kotak Mahindra Bank will be the most impacted lender as the bank’s MD & CEO Uday Kotak and second-in-line Dipak Gupta (joint MD) can’t continue in their roles beyond 2023, as they would have exceeded their tenure, as per the instructions.
RBI has also notified that the Chair of the Board must be an independent director, but existing chairpersons who are not in adherence to this shall be allowed to complete their terms.
Furthermore, the age of a non-executive director on the Board shall be capped at 75 years. Non-exec directors shall not be allowed to continue on the Board for more than eight years at a stretch.
These guidelines come into effect immediately, but existing CEOs/WTDs not adhering to these norms shall be allowed to complete their current terms.
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