Uday Kotak’s early resignation as Chief Executive Officer from Kotak Mahindra Bank Ltd., was an attempt to ease concerns of India’s banking regulator about the out-sized influence he wields over the lender, which is seeking approval to name an internal candidate for the role.
Kotak, the country’s richest financier, resigned the same week the bank sent two names including his long-time lieutenant K V S Manian to the Reserve Bank of India as his potential successors, according to people familiar with the matter. The bank has installed Dipak Gupta as its interim chief executive until the end of the year.
The banking billionaire is expecting that his early departure will put some distance between his larger-than-life sway over the bank and the new leader who will take charge on January 1, 2024, the people said, asking not to be named as the information is not public. This may make RBI more amenable to approving Manian as his successor, they said.
Kotak’s resignation “is entirely voluntary and not as a result of any concerns expressed by the regulator,” a spokesperson for the bank said in an emailed statement. The lender has submitted two names to the RBI for the role and is awaiting the regulators’ approval, according to the statement. A spokesperson for RBI didn’t respond to an email seeking comment.
Kotak received shareholder approval earlier in the year to remain on the board for a period of five years after stepping down from his role as the bank’s leader. This defied the spirit of a RBI rule that outgoing heads of financial institutions should take a three-year cooling period after their tenor to ensure a clean break, the people said.
Outside Candidate
“Kotak has the ability to attract and retain good talent and has fostered governance beyond its legal necessity,” said Abizer Diwanji, head of financial services of Ernst & Young LLP. “Passing on the baton to someone new would require him to walk the talk on the same governance issues of independent thought and drive to be able for someone to lead the bank the way he did.”
In 1985, Kotak started a bill discounting company, which he grew into a financial services conglomerate, with the fourth-largest private lender in India as its flagship. Kotak Mahindra has seldom hired senior managers from its peers and instead relied on creating leaders internally.
An outsider as CEO would face challenges in adjusting to the bank’s culture and could potentially reduce shareholder value, the people said.
Manian, who joined the bank in 1994, heads corporate, institutional and investment banking at Kotak Mahindra Bank since April 2014. Manian also oversees the firm’s institutional equities business. Another internal contender Shanti Ekambaram, has been with the bank since 1991, and heads the consumer banking business at the lender.
Manian, Ekambaram Contenders for CEO Role at Kotak: Street Wrap
“The general belief among peer bankers is that an outsider should be given serious consideration for the CEO role, especially if the right perception is to be conveyed to the market,” said Sourabh Chattopadhyay, a Mumbai-based managing partner with executive search firm Wellesley Partners. “While the internal candidates are highly capable, they may face increased scrutiny from the regulators.”