The rise and fall of an older gen­er­a­tion of bankers

The Hindu Business Line - - BANKING - BLOOMBERG

Change is com­ing to some of In­dia’s top pri­vate banks as reg­u­la­tors shunt aside a pre­vi­ous gen­er­a­tion of lead­ers in a bid to im­prove cor­po­rate gov­er­nance and get to grips with a moun­tain of bad loans.

By cut­ting short the terms of the chief ex­ec­u­tives of Axis Bank and YES Bank, both of which were found to have a higher ra­tio of bad as­sets than ini­tially re­ported, the Re­serve Bank of In­dia has sig­nalled that man­age­ment will be held ac­count­able. That’s a pos­i­tive devel­op­ment for bank share­hold­ers.

“The RBI ac­tion sends a strong sig­nal to boards to take their jobs a lot more se­ri­ously when it comes to eval­u­at­ing CEO per­for­mance and the ques­tion of suc­ces­sion plan­ning,” said TT Ram Mo­han, a pro­fes­sor of Fi­nance and Eco­nom­ics at the In­dian In­sti­tute of Man­age­ment in Ahmedabad. “That can only be good for share­hold­ers from the long-term point of view.”

Fur­ther out, two other se­nior bankers are due to move on in 2020. Aditya Puri will step down as CEO of HDFC Bank, and Romesh Sobti is due to leave his CEO role at In­dusInd Bank. The boards of both these lenders have said that they are putting in place suc­ces­sion plans, with­out pro­vid­ing fur­ther de­tails.

Here’s a sum­mary of the main changes so far:

YES Bank

The cen­tral bank last month re­fused to ap­prove a re­newed term for YES Bank’s Chief Ex­ec­u­tive Of­fi­cer, Rana Kapoor, ask­ing him to step down by Jan­uary. YES Bank shares have tum­bled 27 per cent since this news last month that Kapoor will depart from a bank he has headed since it was founded 14 years ago.

While the cen­tral bank did Chanda Kochhar

not give a rea­son for its de­ci­sion, it had tus­sled with YES Bank about how much of its loans should be recog­nised as non-per­form­ing.

An in­ter­nal can­di­date would be less likely to tam­per with Kapoor’s fo­cus on growth, ac­cord­ing to Payal Pandya, an an­a­lyst at Cen­trum Wealth Man­age­ment. On the other hand, if there was a prob­lem with in­ter­nal con­trols, then an ex­ter­nal can­di­date may pro­vide greater ac­count­abil­ity on the bad loan is­sues, ac­cord­ing to Suyash Rai, se­nior con­sul­tant at Na­tional In­sti­tute Shikha Sharma

of Pub­lic Fi­nance and Pol­icy.

Axis Bank

Axis Bank, too, saw CEO Shikha Sharma’s term cur­tailed by the RBI, af­ter a nineyear ten­ure. She will step down by the end of this year, to be suc­ceeded by Amitabh Chaudhry, for­mer head of HDFC Stan­dard Life In­sur­ance Co.

Pu­nit Srivastava, head of re­search at Daiwa Cap­i­tal Mar­kets, said the tran­si­tion should be pos­i­tive for the bank, whose shares have risen 13.5 per cent since news of Sharma’s de­par­ture April.

They are on a stronger wicket in terms of their bal­ance sheet, with suf­fi­cient cap­i­tal, said Srivastava. The top lead­er­ship is­sue has been cleared.

ICICI Bank

in ICICI Bank an­nounced last week that its long­stand­ing CEO Chanda Kochhar had stepped down. The rea­sons were not dis­closed, but her res­ig­na­tion fol­lows a pe­riod of three months dur­ing which she has been on leave, pend­ing the re­sults of an in­quiry into al­le­ga­tions against her, in­clud­ing claims of a quid pro quo in deal­ings with cer­tain of the bank’s bor­row­ers.

She has been re­placed by the bank’s Chief Op­er­at­ing Of­fi­cer San­deep Bakhshi, who was ap­pointed for a five-year term, sub­ject to ap­proval by the RBI. Kochhar had headed the bank since 2009.

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